I own this stock of Atrium Mortgage Investment Corp (TSX-AI, OTC-AMIVF). I saw this on company on the Canadian Dividend All-Star List. It has just recently started to pay dividends and dividends are good but are taxed as interest income.
When I was updating my spreadsheet, I noticed that there was a lot of insider selling. It appears that the Chairman is selling some of his shares. This accounts for most of the insider selling. I have done well in the stock. The dividends are classified for tax purposes as interest, so this is a stock to hold in a TFSA or RRSP or RRIF.
Dividend yield is good (5% and 6% ranges) to high (7% and above). The current dividend is 6.09%. Each year they also pay a bit more in special dividends. For Special Dividends they paid an extra $0.04 in 2019 and will pay an extra $0.06 in 2020. The 5 and 6 year median dividend yields are both at 7.09%. Dividend growth is low. See chart below. The last increase was in 2018 and it was for 2.3%. Dividends have been paid for 7 years only.
The Dividend Payout Ratios are high but fine for this sort of company. The DPR for EPS for 2019 is 97.9% with 5 year coverage at 99.9%. The DPR for CFPS for 2019 is 86.7% with 5 year coverage at 88.8%. The DPR for Free Cash Flow for 2019 is 77% with 5 year coverage at 70% (MS). I find that Morningstar and Wall Street Journal disagree on what the FCF is. This is not the first time I have found them disagreeing on FCF.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is low and good at 0.20. I did calculate a Liquidity Ratio and it is good at 93.72 but generally this is not calculated for this sort of company. The Debt Ratio is high and good at 2.58. The Leverage and Debt/Equity Ratios are good and low at 1.63 and 0.63 respectively.
The Total Return per year is shown below for years of 5 to 10 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below. They have also given out special dividends and they have done this every year.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 1.92% | 13.02% | 5.36% | 7.67% |
| 2009 | 10 | 3.47% | 8.60% | 3.89% | 4.72% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.45, 12.94 and 13.47. The corresponding 10 year ratios are 11.86, 12.79 and 13.45. The corresponding historical ratios are 11.86, 12.79 and 13.45. The current P/E Ratio is 15.73 based on a stock price of $14.79 and 2020 EPS of $0.94. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $15.17. The 10 year low, median, and high median Price/Graham Price Ratios are 0.74, 0.80 and 0.85. The current P/GP Ratio is 0.97 based on a stock price of $14.79. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.11. The current P/B Ratio is 1.36 based on a Book Value of $456M, Book Value per Share of $10.88 and a stock price of $14.79. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 7.09%. The current dividend yield is 6.09% based on dividends of $0.90 and a stock price of $14.79. The current dividend is 14% below the historical median. The 7 year median and the historical median dividend yield is the same. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 7.96. The current P/S Ratio is 9.34 based on 2020 Revenue estimate of $66.3M, Revenue per Share of $1.58 and a stock price of $14.79. The current ratio is 17% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably a bit pricey. Price is reasonable to expensive. Testing is showing the stock price is either close to expensive or expensive. Last year I thought the price was a bit pricey also and it did well, but it may be pricey for the long term.
Is it a good company at a reasonable price? This is a finance company. I do like this company, but I thing it is on the risky side however it has been rated as a median risk. I will be keeping this company. However, since the dividends are considered interest income, it is best in a TFSA, RRSP or RRIF.
When I look at analysts’ recommendations, I find Strong Buy (1) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $14.70. This implies a total return of 5.48% with a capital loss of 0.61% and dividends of 6.09%.
When I look at analysts’ recommendations last year, I found a 12 month stock price given as $13.00. This implied a total return of 5.54% with a capital loss of 1.29% and dividend gains of 6.83%. This is based on a current stock price of $13.17. What happened is a stock price of $14.79 which meant a total return of 19.13% with 12.30% from capital gains and 6.83% from dividends.
I looked at Stock Chase, and there are no analyst comments on this stock. Ambrose O'Callaghan on Motley Fool thinks this is a good company to buy for income. A writer on Simply Wall Street thinks the company is paying out too much of its earnings in dividends. A writer on Simply Wall Street thinks that the P/E is around industry average but is worried about debt levels. As shown on News File this company had a good year in 2019. Aubrey Sendt on Enterprise Echo talks about some recent analysts ratings.
Atrium Mortgage Investment Corp is a non-banking finance company providing residential and commercial mortgages that lends funds in major urban centres in Canada where the stability and liquidity of real estate are high. Atrium's objectives are to provide its shareholders with stable and secure dividends and preserve shareholders' equity by lending within conservative risk parameters. The company generates its revenue from mortgage interest and fees. Its web site is here Atrium Mortgage Investment Corp.
The last stock I wrote about was about was Russel Metals Inc (TSX-RUS, OTC-RUSMF) ... learn more. The next stock I will write about will be IGM Financial (TSX-IGM, OTC-IGIFF) ... learn more on Wednesday, February 26, 2020 around 5 pm. Tomorrow on my other blog I will write about Northland Power Inc.... learn more on Tuesday, February 25, 2020 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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