Stock Analysis

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

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TSX:AI
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The board of Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend on the 12th of January, with investors receiving CA$0.075 per share. 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 Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 93% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 4.4% 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.

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TSX:AI Historic Dividend December 12th 2021

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. The dividend has gone from CA$0.83 in 2012 to the most recent annual payment of CA$0.92. This means that it has been growing its distributions at 1.2% per annum over that time. 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.

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. However, Atrium Mortgage Investment's EPS was effectively flat over the past five years, which could stop the company from paying more every year. 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. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

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 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. We have also put together a list of global stocks with a solid dividend.

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