Yahoo Finance There's A Lot To Like About Archrock's (NYSE:AROC) Upcoming US$0.14 Dividend
Archrock, Inc. (NYSE:AROC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase Archrock's shares before the 8th of November in order to be eligible for the dividend, which will be paid on the 16th of November.
The company's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.58 per share. Last year's total dividend payments show that Archrock has a trailing yield of 6.9% on the current share price of $8.41. If you buy this business for its dividend, you should have an idea of whether Archrock's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Archrock
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 84% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 39% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Archrock paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Archrock has grown its earnings rapidly, up 46% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Archrock's dividend payments are broadly unchanged compared to where they were eight years ago.
To Sum It Up
Is Archrock an attractive dividend stock, or better left on the shelf? Archrock's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Archrock, and we would prioritise taking a closer look at it.
While it's tempting to invest in Archrock for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Archrock (1 is a bit concerning!) that deserve your attention before investing in the shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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