Antero Midstream’s 9.73% Yield Is Running Out Of Gas

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.

Chart: This Is Not What You Want to See...

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

Dividend Grade Guide

More By This Author:

How To Buy 100 Shares For Pennies On The Dollar
Top 3 Dividend Stocks For Any Market
Best Stocks For A 2022 Recession

Disclaimer: Nothing published by Wealthy Retirement should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Power Hedge 1 year ago Contributor's comment

Why are you using free cash flow and not distributable cash flow?

I see your point though. Let me investigate this one further and maybe I'll have a response for this article.