Stock Analysis

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

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TSX:AI
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Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend of CA$0.075 per share on the 12th of November. 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 Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Atrium Mortgage Investment's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 6.3% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 92%, which is on the higher side, but certainly still feasible.

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TSX:AI Historic Dividend October 17th 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 first annual payment during the last 9 years was CA$0.83 in 2012, 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. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Atrium Mortgage Investment's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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 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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