Why You Should Not Buy Archrock Partners LP. (NASDAQ:APLP) For Dividend
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Archrock Partners LP. (NASDAQ:APLP) has returned an average of 9.00% per year to investors in the form of dividend payouts. Does Archrock Partners tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Archrock Partners
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will it be able to continue to payout at the current rate in the future?
Does Archrock Partners pass our checks?
Archrock Partners has a negative payout ratio, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Archrock Partners fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, Archrock Partners produces a yield of 7.45%, which is high for Energy Services stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Archrock Partners for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important factors you should look at:
Historical Performance: What has APLP’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Archrock Partners’s board and the CEO’s back ground.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
