Antero Midstream (NYSE:AM) Has Affirmed Its Dividend Of $0.225

Antero Midstream Corporation (NYSE:AM) has announced that it will pay a dividend of $0.225 per share on the 8th of February. This means the annual payment is 7.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Antero Midstream

Antero Midstream Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 39.9%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 120% over the next year.

Antero Midstream's Dividend Has Lacked Consistency

Antero Midstream has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from $0.186 total annually to $0.90. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Antero Midstream's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Antero Midstream has seen EPS rising for the last five years, at 86% per annum. EPS has been growing well, but Antero Midstream has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Antero Midstream's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Antero Midstream's payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Antero Midstream that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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