It looks like Archrock, Inc. (NYSE:AROC) is about to go ex-dividend in the next three days. You will need to purchase shares before the 5th of February to receive the dividend, which will be paid on the 16th of February.

Archrock's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.58 to shareholders. Based on the last year's worth of payments, Archrock stock has a trailing yield of around 6.5% on the current share price of $8.87. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Archrock can afford its dividend, and if the dividend could grow.

View our latest analysis for Archrock

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Archrock's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Archrock didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Archrock was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Archrock dividends are largely the same as they were seven years ago.

Remember, you can always get a snapshot of Archrock's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Archrock worth buying for its dividend? It's hard to get used to Archrock paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. To summarise, Archrock looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Archrock, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 3 warning signs for Archrock (of which 1 makes us a bit uncomfortable!) you should know about.

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. 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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