The board of Atrium Mortgage Investment Corporation (TSE:AI) has announced that it will pay a dividend on the 12th of April, with investors receiving CA$0.075 per share. Based on this payment, the dividend yield on the company's stock will be 7.2%, which is an attractive boost to shareholder returns.
Atrium Mortgage Investment's Dividend Forecasted To Be Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Atrium Mortgage Investment has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Atrium Mortgage Investment's last earnings report, the payout ratio is at a decent 84%, meaning that the company is able to pay out its dividend with a bit of room to spare.
EPS is forecast to rise by 2.2% over the next 3 years. The future payout ratio over that same time horizon is estimated by analysts to be 84% which is a bit high but can definitely be sustainable.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CA$0.83 in 2013, and the most recent fiscal year payment was CA$0.90. Its dividends have grown at less than 1% per annum over this time frame. 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.
Dividend Growth May Be Hard To Achieve
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. However, Atrium Mortgage Investment has only grown its earnings per share at 2.4% 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.
Atrium Mortgage Investment's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Atrium Mortgage Investment that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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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