Atrium Mortgage Investment (TSE:AI) Is Due To Pay A Dividend Of CA$0.075

The board of Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend on the 13th of June, with investors receiving CA$0.075 per share. This makes the dividend yield 9.7%, which will augment investor returns quite nicely.

See our latest analysis for Atrium Mortgage Investment

Atrium Mortgage Investment Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Atrium Mortgage Investment's was paying out quite a large proportion of earnings and 85% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

The next 12 months is set to see EPS grow by 6.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 101%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CA$0.83 in 2013, and the most recent fiscal year payment was CA$1.13. This means that it has been growing its distributions at 3.1% per annum 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. 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. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Atrium Mortgage Investment's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Atrium Mortgage Investment is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Atrium Mortgage Investment you should be aware of, and 2 of them are concerning. 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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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.