Stock Analysis

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

  •  Updated
TSX:AI
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Atrium Mortgage Investment Corporation's (TSE:AI) investors are due to receive a payment of CA$0.075 per share on 13th of October. Based on this payment, the dividend yield on the company's stock will be 6.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 95% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 73%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 6.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 92%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

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TSX:AI Historic Dividend September 25th 2021

Atrium Mortgage Investment's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from CA$0.83 in 2012 to the most recent annual payment of CA$0.90. Its dividends have grown at less than 1% per annum over this time frame. 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Atrium Mortgage Investment's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

The Dividend Could Prove To Be Unreliable

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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Atrium Mortgage Investment that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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