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Highlights
- Antero Midstream announces a dividend of $0.225 per share.
- Dividend yield stands at 5.5%, above industry average.
- High payout ratio and past dividend cuts raise sustainability concerns.
Antero Midstream Partners LP, a notable player in the NYSE Energy Stocks sector, has declared a dividend payment of $0.225 per share. Despite offering a higher-than-average dividend yield of 5.5%, the company's past dividend cuts and high payout ratio raise questions about the long-term sustainability of these payments
Dividend Announcement and Yield
Antero Midstream Corporation (NYSE:AM) has declared a dividend of $0.225 per share, with payment scheduled for February 12. The announced dividend offers a yield of 5.5%, which surpasses the industry average. This marks the company's continued commitment to returning cash to its shareholders, maintaining a relatively attractive yield despite the overall market conditions.
Earnings Coverage of the Dividend
While the dividend may seem promising, the sustainability of such payouts warrants attention. The company has previously distributed more than what it earned. Before the recent announcement, Antero Midstream paid out 111% of its earnings, indicating a higher payout ratio. Although the payout ratio isn’t an immediate red flag, it suggests that the company might be prioritizing shareholder returns over reinvesting in business growth. Over the next year, earnings per share (EPS) are projected to grow by 36.8%, which could help in covering the dividend payouts, although the payout ratio may still remain relatively high.
Historical Dividend Track Record
Antero Midstream has had a history of dividend reductions, including a cut at least once since its inception. Despite this, the company has managed to grow its distributions at a rapid pace. Since 2017, the dividend has grown at an annual rate of about 22%, from $0.186 per share to the current full-year payment of $0.90. This growth, however, should be viewed cautiously due to the past reductions. Companies that have previously cut dividends may do so again, which introduces a degree of risk for those relying heavily on the dividend income.
Concerns Around Dividend Sustainability
The key concern with Antero Midstream’s dividend lies in the company's high payout ratio, which has been hovering around 111%. Although EPS growth of 51% annually over the past five years provides optimism, the payout’s sustainability remains uncertain. If the company’s earnings continue to grow at a robust pace, the dividend may be maintainable, but the high payout ratio suggests that this could be difficult to sustain over the long term.
Antero Midstream has demonstrated rapid earnings growth, and the dividend yield remains above average, but its track record of dividend cuts and the current high payout ratio introduce uncertainty. While its strong earnings may support the dividend in the short term, the company’s history and financial structure suggest that caution should be exercised. Those looking for stable and sustainable dividends may need to consider the potential risks associated with this payout.
