Stock Analysis

Atrium Mortgage Investment (TSE:AI) Has Affirmed Its Dividend Of CA$0.075

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The board of Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend on the 12th of October, with investors receiving CA$0.075 per share. Based on this payment, the dividend yield on the company's stock will be 8.2%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment Will Pay Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Atrium Mortgage Investment has a long history of paying out a part of its earnings to shareholders. Based on Atrium Mortgage Investment's last earnings report, the payout ratio is at a decent 91%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 2.4%. If the dividend continues on its recent course, the future payout ratio in 12 months could be 97%, which is a bit high and could start applying pressure to the balance sheet.

TSX:AI Historic Dividend September 6th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CA$0.83 in 2012, and the most recent fiscal year payment was CA$0.97. This means that it has been growing its distributions at 1.6% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Atrium Mortgage Investment hasn't seen much change in its earnings per share over the last five years. Slow growth and a high payout ratio could mean that Atrium Mortgage Investment has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Atrium Mortgage Investment that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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