Stock Analysis

Atrium Mortgage Investment (TSE:AI) Will Pay A 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 13th of October. This makes the dividend yield 6.2%, which will augment investor returns quite nicely.

View 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. Based on the last payment, Atrium Mortgage Investment's profits didn't cover the dividend, but the company was generating enough cash instead. 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.

EPS is set to grow by 6.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%. 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 11th 2021

Atrium Mortgage Investment's Dividend Has Lacked Consistency

Looking back, Atrium Mortgage Investment's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2012, the first annual payment was CA$0.83, compared to the most recent full-year payment of CA$0.90. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Atrium Mortgage Investment May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. 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. So the company has struggled to grow its EPS yet it's still paying out 95% of its earnings. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

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. 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. 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. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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