Dividend Investors: Don't Be Too Quick To Buy Atrium Mortgage Investment Corporation (TSE:AI) For Its Upcoming Dividend

By
Simply Wall St
Published
February 21, 2020
TSX:AI
Source: Shutterstock

It looks like Atrium Mortgage Investment Corporation (TSE:AI) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 27th of February will not receive this dividend, which will be paid on the 12th of March.

Atrium Mortgage Investment's next dividend payment will be CA$0.075 per share, on the back of last year when the company paid a total of CA$0.96 to shareholders. Based on the last year's worth of payments, Atrium Mortgage Investment stock has a trailing yield of around 6.5% on the current share price of CA$14.79. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Atrium Mortgage Investment has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Atrium Mortgage Investment

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, Atrium Mortgage Investment paid out 92% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

TSX:AI Historical Dividend Yield, February 22nd 2020
TSX:AI Historical Dividend Yield, February 22nd 2020

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Atrium Mortgage Investment's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Atrium Mortgage Investment also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, Atrium Mortgage Investment has lifted its dividend by approximately 2.1% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Atrium Mortgage Investment? Atrium Mortgage Investment's earnings have barely moved in recent times, and the company is paying out a disagreeably high percentage of its earnings; a mediocre combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Curious what other investors think of Atrium Mortgage Investment? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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