Atrium Mortgage Investment Corporation's (TSE:AI) investors are due to receive a payment of CA$0.075 per share on 13th of December. This makes the dividend yield 8.7%, which will augment investor returns quite nicely.
Atrium Mortgage Investment's Dividend Forecasted To Be Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Having distributed dividends for at least 10 years, Atrium Mortgage Investment has a long history of paying out a part of its earnings to shareholders. Based on Atrium Mortgage Investment's last earnings report, the payout ratio is at a decent 88%, meaning that the company is able to pay out its dividend with a bit of room to spare.
EPS is forecast to rise by 14.4% over the next 3 years. The future payout ratio over that same time horizon is estimated by analysts to be 80% which is a bit high but can definitely be sustainable.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CA$0.83 in 2012, and the most recent fiscal year payment was CA$0.97. This means that it has been growing its distributions at 1.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Atrium Mortgage Investment hasn't seen much change in its earnings per share over the last five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
Our Thoughts On Atrium Mortgage Investment's Dividend
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 track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Atrium Mortgage Investment (of which 1 is a bit concerning!) you should know about. 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.
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