Stock Analysis

Atrium Mortgage Investment (TSE:AI) Is Due To Pay 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 12th of April. This makes the dividend yield 7.0%, which will augment investor returns quite nicely.

View our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Atrium Mortgage Investment's dividend made up quite a large proportion of earnings but only 61% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 2.9%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 98% over the next year.

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TSX:AI Historic Dividend March 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. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from CA$0.83 to CA$0.97. This means that it has been growing its distributions at 1.7% per annum over that time. 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.

Atrium Mortgage Investment May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Atrium Mortgage Investment's Dividend

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. We don't think Atrium Mortgage Investment is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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 collection of strong dividend payers.

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