Today is Thursday, August 1, 2019, and this is your daily dividend safety update. Today we’re looking at Archrock (NYSE: AROC) stock to see whether its 4.94% dividend is safe.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Archrock. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Archrock has a payout ratio of 127.7%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
Archrock has not grown its cash flow in the last year. That’s a bad omen for dividend investors. No cash flow means no dividend, so if cash flow isn’t growing, that’s a problem for us.
Dividend History & Recent Cuts
Archrock has a recent history of dividend cuts. In fact, it’s only been 3 years since the last cut. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
Archrock stock has failed 3 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is very likely in the next few years.
Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.