Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan
Member's Area

Monthly Dividend Stock In Focus: Atrium Mortgage Investment Corporation


Updated on October 17th, 2024 by Felix Martinez

Atrium Mortgage Investment Corporation (AMIVF) has two appealing investment characteristics:

#1: It is a high-yield stock based on its  10.5% dividend yield.
Related: List of 5%+ yielding stocks.
#2: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks

You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:

 

Click here to instantly download your free spreadsheet of all 77 monthly dividend stocks now, along with important investing metrics.

The combination of a high dividend yield and a monthly dividend could make Atrium Mortgage Investment Corporation appealing to income-oriented investors. In addition, the company is the leading non-bank lender in Canada, and thus, it has a reliable business model. In this article, we will discuss Atrium Mortgage Investment Corporation’s prospects.

Business Overview

Atrium Mortgage Investment Corporation is a non-bank lender that provides residential and commercial mortgage services in Canada. The company offers various types of mortgage loans, such as land and development financing, construction and mezzanine financing, and commercial term and bridge financing services for residential, multi-residential, and commercial real properties. Atrium Mortgage Investment Corporation was founded in 2001 and is headquartered in Toronto, Canada.

Atrium Mortgage Investment Corporation invests in commercial and residential mortgages from customers who cannot borrow funds from traditional banking channels. To reduce its risk, the company has a diversified mortgage portfolio and does its best to maintain a disciplined underwriting policy.

A typical loan in the company’s portfolio has an interest rate of 6.99%-12.99%, a duration of 1-2 years, and monthly mortgage payments. Atrium Mortgage Investment Corporation’s mortgage portfolio currently has a weighted average interest rate of 10.93% and consists of 88% residential mortgages and 12% commercial mortgages.

Source: Investor Presentation

The company tries to reduce operating expenses and provide stable dividends to its shareholders with minimum volatility. To this end, it maintains a high-quality mortgage portfolio characterized by a conservative underwriting policy.

Thanks to its prudent management, Atrium Mortgage Investment Corporation has offered consistent returns to its shareholders over the last decade. During this period, the company’s return on equity has steadily remained 600-800 basis points above the yield of the Canadian government’s 5-year bond.

Thanks to its solid business model, Atrium Mortgage Investment Corporation has proved extremely resilient throughout the coronavirus crisis. This is impressive, as the pandemic would normally be expected to affect the company’s borrowers, who cannot borrow funds from large financial institutions. The resilience of Atrium Mortgage Investment Corporation to the pandemic is a testament to the strength of the company’s business model.

The company reported strong second-quarter results for 2024, showcasing a record mortgage portfolio of $907.8 million. The company posted earnings per share of $0.26, with net income totaling $11.5 million for the quarter. Despite slower real estate market activity, Atrium has maintained a high-quality portfolio, with 96.8% in first mortgages and an average loan-to-value ratio of 64.4%. The company also increased its credit facility to $340 million, reflecting confidence in its financial performance.

For the three months ending June 30, 2024, Atrium’s total assets reached $885.6 million, a slight increase from the previous year. Revenues grew by 5.9% to $24.9 million, while net income decreased by 20.1%, largely due to a higher provision for mortgage losses, which rose to $29.3 million. Over the six-month period, revenue totaled $50.1 million, up 6.1% year-over-year, though net income saw a 17.7% decline.

The mortgage portfolio remained strong, particularly in residential properties, which account for 85.5% of the total. Geographically, the Greater Toronto Area made up 78.4% of the portfolio, with a weighted average loan-to-value of 60.9% and an average interest rate of 10.93%. Atrium continues to focus on defensive lending strategies while navigating the broader market challenges, expecting lower inflation and interest rates to improve conditions.

Growth Prospects

Atrium Mortgage Investment Corporation has consistently performed remarkably over the last nine years. Its management’s focus on minimizing operating expenses and providing stable returns to shareholders has certainly paid off.

On the other hand, the company has posted essentially flat earnings per share over the last nine years. Therefore, investors should not expect meaningful earnings growth going forward. In other words, Atrium Mortgage Investment Corporation’s reliable performance comes at a price, namely lackluster growth prospects.

Given Atrium Mortgage Investment Corporation’s rock-solid business model but also its lackluster performance record, we expect approximately flat earnings per share five years from now.

Dividend & Valuation Analysis

Atrium Mortgage Investment Corporation is currently offering an exceptionally high dividend yield of 10.5%, nearly quintuple the 1.3% yield of the S&P 500. The stock is thus an interesting candidate for income-oriented investors, but U.S. investors should be aware that the dividend they receive is affected by the prevailing exchange rate between the Canadian dollar and the USD.

Atrium Mortgage Investment Corporation has an elevated payout ratio of over 100%. However, it is in a strong financial position, with its interest expense currently consuming slightly less than 25% of its total interest and dividend income. As a result, the company is not likely to cut its dividend significantly anytime soon.

It is also remarkable that Atrium Mortgage Investment Corporation has maintained a solid dividend record over the last decade.

Source: Investor Presentation

Overall, shareholders should rest assured that Atrium Mortgage Investment Corporation’s base dividend is safe, and the company is likely to continue paying a special dividend year after year.

On the other hand, the company has hardly grown its dividend in USD over the last ten years due to the depreciation of the Canadian dollar versus the USD. Given the low single-digit growth rate of the dividend in Canadian dollars, it is prudent for U.S. investors to expect minimum dividend growth going forward.

In reference to the valuation, Atrium Mortgage Investment Corporation has been trading for 10.3 times its earnings per share for the last 12 months. Given the company’s resilient business model but also its lackluster growth prospects, we assume a fair price-to-earnings ratio of 12.0 for the stock. Therefore, the current earnings multiple is slightly lower than our assumed fair price-to-earnings ratio. If the stock trades at its fair valuation level in five years, it will enjoy a 1.8% annualized gain in its returns.

Taking into account the flat earnings per share, the 10.5% dividend yield and a 1.8% annualized expansion of valuation level, Atrium Mortgage Investment Corporation could offer a 12.3% average annual total return over the next five years. This is a good expected total return, but we recommend waiting for a lower entry point in order to enhance the margin of safety and increase the expected return from the stock.

Final Thoughts

Atrium Mortgage Investment Corporation is characterized by prudent management and a defensive business model. In addition, the stock is offering an exceptionally high dividend yield of 10.5%. The company has an elevated payout ratio of 100%, but it has a strong balance sheet and a consistent dividend record. As a result, its dividend should be considered safe, though investors should not expect meaningful dividend growth anytime soon. Overall, the stock seems undervalued right now.

Moreover, Atrium Mortgage Investment Corporation is characterized by extremely low trading volume. This means that it may be hard to establish or sell a large position in this stock.

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.



articles
Golden Rule Commitment
contact - legal - testimonials