Interested In Antero Midstream's (NYSE:AM) Upcoming US$0.225 Dividend? You Have Four Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Antero Midstream Corporation (NYSE:AM) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Antero Midstream's shares on or after the 24th of July will not receive the dividend, which will be paid on the 7th of August.

The company's next dividend payment will be US$0.225 per share. Last year, in total, the company distributed US$0.90 to shareholders. Calculating the last year's worth of payments shows that Antero Midstream has a trailing yield of 6.1% on the current share price of US$14.77. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Antero Midstream

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Antero Midstream distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.

It's good to see that while Antero Midstream's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Antero Midstream's earnings per share have been growing at 20% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, Antero Midstream has lifted its dividend by approximately 25% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Antero Midstream worth buying for its dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall, it's hard to get excited about Antero Midstream from a dividend perspective.

So if you want to do more digging on Antero Midstream, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 2 warning signs for Antero Midstream (of which 1 doesn't sit too well with us!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com