Stock Analysis

Atrium Mortgage Investment (TSE:AI) Has Announced A Dividend Of CA$0.075

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TSX:AI
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Atrium Mortgage Investment Corporation (TSE:AI) will pay a dividend of CA$0.075 on the 11th of March. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.

See our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Atrium Mortgage Investment's dividend made up quite a large proportion of earnings but only 74% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to grow by 3.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 92% which is a bit high but can definitely be sustainable.

historic-dividend
TSX:AI Historic Dividend February 8th 2022

Atrium Mortgage Investment's Dividend Has Lacked Consistency

Atrium Mortgage Investment has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was CA$0.83 in 2013, and the most recent fiscal year payment was CA$0.92. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Atrium Mortgage Investment's EPS was effectively flat over the past five years, which could stop the company from paying more every year. 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. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On Atrium Mortgage Investment's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Atrium Mortgage Investment's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Atrium Mortgage Investment is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Atrium Mortgage Investment that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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