At the end of 2020, I warned readers that Antero Midstream‘s (NYSE: AM) dividend was going to be cut in the following year.

The problem with Antero was falling free cash flow and a payout ratio that was too high. Antero simply couldn’t afford its dividend.

Four months later, as I predicted, Antero slashed its quarterly dividend from $0.3075 per share to $0.225 per share – a 27% reduction.

I expect Antero to cut it again.

Antero operates natural gas pipelines in Ohio, Pennsylvania, and West Virginia.

The problem is that Antero’s numbers are going the wrong way.

Cash flow is falling while dividends paid is rising – and this year, if the analysts’ consensus estimate is correct, Antero won’t be able to fund its dividend with the cash flow it generates from running its business.

Last year’s free cash flow total of $477 million exceeded dividends paid by just $5 million. That’s too close for comfort. This year, dividends paid is forecast to overrun the $406 million in expected free cash flow by $25 million.

So we’re looking at declining free cash flow and a payout ratio that is again too high.

Weak fundamentals, combined with the fact that the company has already reduced its dividend twice in four years, mean you don’t have to be a Chartered Financial Analyst to come to the conclusion that Antero is going to lower its dividend again in the near future.

Which is too bad because a nearly 10% yield has a nice ring to it. But anyone who owns Antero Midstream at the current price shouldn’t get used to that high of a dividend. It’s going lower.

Dividend Safety Rating: F

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