Atrium Mortgage Investment Corporation (TSE:AI) will pay a dividend of CA$0.075 on the 13th of December. Based on this payment, the dividend yield on the company's stock will be 9.3%, which is an attractive boost to shareholder returns.
Our analysis indicates that AI is potentially undervalued!
Atrium Mortgage Investment's Dividend Forecasted To Be Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Atrium Mortgage Investment has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Atrium Mortgage Investment's last earnings report, the payout ratio is at a decent 91%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to expand by 6.6%. Analysts estimate the future payout ratio could reach 88% over that same time period, which is on the higher side, but certainly still feasible.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CA$0.83 in 2012 to the most recent total annual payment of CA$0.97. This means that it has been growing its distributions at 1.6% 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.
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. Atrium Mortgage Investment hasn't seen much change in its earnings per share over the last five years. 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. 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
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 are bit high to be considered sustainable, and the track record isn't the best. We don't think Atrium Mortgage Investment is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Atrium Mortgage Investment that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.