AR - Antero Midstream: The 8.50% Yield Looks Safe But Could Still Be Cut Again

• Antero Midstream sustained their dividends throughout 2020 but reduced them at the start of 2021 despite seeing solid cash flow performance.
• This was done to fund higher capital expenditure as a result of the drilling program set forth by their parent company, Antero Resources.
• This highlights the managerial risks associated with being a subsidiary company since they must follow the wishes of their parent.
• Their new dividends are fundamentally sustainable with adequate coverage and liquidity with decreasing leverage but future reductions remain possible due to this managerial risk.
• Since this will continue overshadowing their dividend safety well into the future, I believe that only a neutral rating is appropriate despite the appeal of their high 8.50% yield.

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