Stock Analysis

Atrium Mortgage Investment's (TSE:AI) Dividend Will Be CA$0.075

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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 14th of December. Based on this payment, the dividend yield on the company's stock will be 6.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Atrium Mortgage Investment's dividend made up quite a large proportion of earnings but only 74% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to grow by 4.0% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

historic-dividend
TSX:AI Historic Dividend November 9th 2021

Atrium Mortgage Investment's Dividend Has Lacked Consistency

Looking back, Atrium Mortgage Investment's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2012, the dividend has gone from CA$0.83 to CA$0.92. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. 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.

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. Atrium Mortgage Investment hasn't seen much change in its earnings per share over the last five years. Atrium Mortgage Investment's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings 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

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. This company is not in the top tier of income providing stocks.

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. For instance, we've picked out 1 warning sign for Atrium Mortgage Investment that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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