Atrium Mortgage Investment (TSE:AI) Has Affirmed Its Dividend Of CA$0.075

The board of Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend on the 12th of March, with investors receiving CA$0.075 per share. This makes the dividend yield 10.0%, which will augment investor returns quite nicely.

View our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Atrium Mortgage Investment was paying out 74% of earnings, but a comparatively small 64% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to fall by 10.5% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 85%, meaning that most of the company's earnings are being paid out to shareholders.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was CA$0.80, compared to the most recent full-year payment of CA$1.13. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Atrium Mortgage Investment has only grown its earnings per share at 4.8% per annum over the past five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. 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.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Just as an example, we've come across 3 warning signs for Atrium Mortgage Investment you should be aware of, and 1 of them shouldn't be ignored. Is Atrium Mortgage Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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