Up to date on June twenty eighth, 2024 by Bob Ciura
Antero Midstream (AM) inventory at present has a horny dividend yield of 6.0%. It is likely one of the high-yield shares in our database.
We’ve created a spreadsheet of shares (and intently associated REITs and MLPs, and so on.) with dividend yields of 5% or extra.
Antero is a part of our ‘Excessive Dividend 50’ collection, the place we cowl the 50 highest yielding shares within the Positive Evaluation Analysis Database.
You possibly can obtain your free full listing of all excessive dividend shares with 5%+ yields (together with vital monetary metrics akin to dividend yield and payout ratio) by clicking on the hyperlink beneath:
On this article, we’ll analyze the prospects of Antero Midstream.
Enterprise Overview
Antero Midstream Company is a midstream firm offering gathering and compression, processing and fractionation, and pipeline providers on a captive foundation to Antero Assets (AR).
AR is the fifth largest pure fuel producer and 2nd largest NGL producer within the nation, working fields primarily in West Virginia.
As appears typical for these midstream companies, the publicly traded entity is a pass-through for the income from the underlying working entity.
Supply: Investor Presentation
Within the 2024 first quarter, Antero Midstream’s gathering and processing volumes elevated 4% and 6% respectively in comparison with the prior yr quarter.
Internet earnings reached an organization report of $104 million, or $0.21 per diluted share, marking a 17% per share enhance from the earlier yr quarter.
Adjusted EBITDA additionally elevated by 10% in comparison with the prior yr quarter. Capital expenditures decreased by 11% from the prior yr quarter.
Income for the primary quarter was $279 million, with vital contributions from the Gathering and Processing section and the Water Dealing with section.
Development Prospects
Antero Midstream’s main development catalyst transferring ahead is paying down its debt, which it plans to do aggressively within the coming years. Within the 2024 first quarter AM’s leverage declined to three.1x, down from 3.3x on the finish of 2023.
It has additionally accomplished a reasonably aggressive capital spending program and these initiatives are actually coming on-line, producing elevated EBITDA.
It additionally might proceed to opportunistically pursue small development initiatives as they grow to be out there to it via its shut partnership with Antero Assets.
Antero Midstream can also be investing in development via optimizing its asset footprint.
Supply: Investor Presentation
For instance, within the first quarter the corporate positioned the Grays Peak compressor station into service with an preliminary capability of 160 million cubic ft per day.
In any other case, it can look to extend dividend per share payouts and/or purchase again shares if they continue to be attractively priced. Antero at present has a $500 million share repurchase authorization in place.
Shopping for again shares will function a development catalyst by decreasing the full share rely, thereby growing distributable money circulate per share over time.
Aggressive Benefits
Antero Midstream’s main aggressive benefits are present in its multi-decade underlying stock through its partnership with Antero Assets, its just-in-time strategy to capital investments, and its peer main returns on invested capital.
It’s the main midstream service supplier to Antero Assets, an organization with a premium core drilling stock that exceeds 20 years.
Its just-in-time and versatile capital funding philosophy helps it to reduce dangers on its capital expenditures whereas additionally minimizing the time from spend to money circulate on its development initiatives.
In consequence, it is ready to generate constant and repeatable natural development together with peer-leading returns on invested capital.
Dividend Evaluation
Antero Midstream is unlikely to develop its dividend in 2024, as administration is laser centered on deleveraging the steadiness sheet proper now. Thankfully, the corporate has no near-term maturities in 2024 or 2025.
As soon as it achieves its leverage goal of at or beneath 3.0x (anticipated by the tip of 2024), it might enhance the dividend, or proceed to additional pay down debt, relying on market and trade circumstances on the time.
Nonetheless, given the 6% present dividend yield, there is no such thing as a want for dividend development to generate a horny yield, and the dividend seems to be fairly secure as nicely.
AM has a projected dividend payout ratio of 53% for 2024, which signifies a safe dividend.
Remaining Ideas
Antero Midstream is likely one of the most cost-effective C-Corp midstream corporations available in the market right now, and in addition affords a really engaging dividend yield that seems secure for a few years to come back.
It has a secure, commodity value resistant money circulate profile with an extended demand timeline forward of it. Moreover, its predominant counter-party is quickly deleveraging its steadiness sheet, additional strengthening Antero Midstream’s security profile.
Whereas Antero Midstream is unlikely to be a fast grower of its money circulate or its dividend within the coming few years, we view AM inventory as engaging for earnings buyers.
In case you are interested by discovering high-quality dividend development shares and/or different high-yield securities and earnings securities, the next Positive Dividend assets shall be helpful:
Excessive-Yield Particular person Safety Analysis
Different Positive Dividend Assets
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