Antero Midstream's (NYSE:AM) Dividend Will Be $0.225

The board of Antero Midstream Corporation (NYSE:AM) has announced that it will pay a dividend on the 12th of February, with investors receiving $0.225 per share. The dividend yield will be 5.5% based on this payment which is still above the industry average.

Check out our latest analysis for Antero Midstream

Antero Midstream's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 111% of what it was earning and 77% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 36.8%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

Antero Midstream's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was $0.186, compared to the most recent full-year payment of $0.90. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Antero Midstream has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Antero Midstream has grown earnings per share at 51% per year over the past five years. While EPS is growing rapidly, Antero Midstream paid out a very high 111% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. We don't think Antero Midstream is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Antero Midstream that investors should know about before committing capital to this stock. Is Antero Midstream not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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