As an income investor, timing is everything. Every dividend is a valuable return from your portfolio, allowing you to grow your investments and enjoy your everyday life. So, let’s take a closer look at a company that offers outstanding income potential and demonstrates the power of time in investing.
A Trip Down Memory Lane
In a market where many companies are trading below their post-COVID highs, Antero Midstream Corporation (NYSE: AM) stands out. With a yield of 7.2%, AM has reached its highest prices since 2019. As a C-corp focused on natural gas transportation and export, AM plays a crucial role for its parent company, Antero Resources (AR), one of North America’s largest natural gas producers.
Despite the challenging market conditions since 2022, AM has delivered a total return of over 40%, making it a strong performer. But, before we delve deeper into this opportunity, let’s address a fundamental question: when a stock is up a lot, should you sell?
The answer lies in your initial investment rationale and its continued relevance for your portfolio. Treading Softly, a co-author, highlighted AM’s dividend growth guidance cut back in May 2019, which many investors saw as a buying opportunity. Despite market skepticism and even a dividend cut during the COVID pandemic, AM proved its resilience. Those who held on during the downturn have not only recouped their losses but also enjoyed significant gains.
Owning a Self-Funding Midstream
AM’s long-term goal is to become a self-funded midstream company, minimizing reliance on equity or debt. This business model, successfully adopted by peers like Enterprise Products Partners (EPD), reduces the risks associated with dilution and excessive debt. AM has made significant progress, transitioning from negative free cash flow (FCF) to positive FCF after dividends. It plans to use this cash flow to reduce debt and further strengthen its balance sheet, paving the way for increased dividend growth in the future.
While AM’s journey hasn’t been easy, it has weathered trade wars, viruses, inflation, rising interest rates, and a dividend cut. Now, as it starts reaping the benefits of its strategy, investors can look forward to consistently growing dividends supported by solid earnings and a stronger balance sheet.
Time: A Friend, Not a Foe
One of the key takeaways from AM’s story is the significance of time in investment success. Rather than chasing short-term gains, focus on building a sustainable method that allows you to capitalize on the market’s potential without constant monitoring. Ultimately, financial freedom and security come from owning a well-diversified portfolio that generates reliable income, giving you the freedom to pursue your passions in retirement.
So, instead of chopping down the apple tree just as it starts bearing fruit, embrace the patient approach of growing an orchard. Allow your investments to flourish over time, collecting the abundant dividends they offer. That’s the beauty of income investing, and that’s why AM is a compelling opportunity for income-oriented investors.
With AM, you have the chance to earn a 7.2% yield from natural gas and more in the future. As you navigate the markets, always remember that time is your friend, not your foe. By adopting a long-term perspective and embracing the income method, you can build a portfolio that supports your financial well-being and allows you to enjoy the things you love.