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. It has only been around since 2012 and has good dividends. It has just recently started to pay dividends and dividends are good but are taxed as income. They have also paid special dividends each year.
When I was updating my spreadsheet, I noticed I have done quite well with this stock even though I do not have much invested. My total return is 14.31% per year with 6.61% from capital gains and 7.70% from dividends. Part of the reason is that I bought shares in April of 2020 when the stock was just over $9.00 a share. This is ideal from an RRSP account or a TFSA account as they pay interest not dividends and interest payments are fully taxed.
The dividend yields are good with dividend growth low with special dividends. The current dividend yield is good (5% and 6% ranges) at 6.97%. The 5, 7 and historical dividend yields are high (above 6% range) at 7.33%, 7.16% and 7.16%. The dividend growth over the past 5 year is just 1.43% per year. This is because they stop rising dividends in 2018. They have paid a special dividend each year so far.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 102% with 5 year coverage at 101%. However, if we only include the regular dividend payment, the DPR for EPS goes down to 96%. The DPR for CFPS for 2020 is 71% with 5 year coverage at 83%. The DPR for Free Cash Flow for 2020 is 69% with 5 year coverage at 70%. I know they sound high, but I believe they can afford these dividend payouts. I check with TD Securities report on this stock and they also feel the payout ratios are not a problem.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is 0.30 and cash flow could pay the debt off in 2.8 years. For the cash flow to pay off Long Term Debt in 3 years or less is ideal. The Liquidity Ratio is not important for Financials, but in this case, they have little in the way of current liabilities. The Debt Ratio for 2020 is 2.58 and so very good. The Leverage and Debt/Equity Ratios for 2020 are also very good at 1.63 and 0.63, respectively.
The Total Return per year is shown below for years of 5 to 11 to the end of 2020. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 1.43% | 10.15% | 2.10% | 8.05% |
| 2010 | 10 | 2.97% | 8.50% | 2.49% | 6.02% |
| 2009 | 11 | 7.55% | 2.93% | 4.62% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.45, 12.94 and 14.84. The corresponding 10 year ratios are 11.78, 12.71 and 13.47. The corresponding historical ratios are 11.78, 12.71 and 13.47. The current P/E Ratio is 13.18 based on a stock price of $12.92 and EPS estimate for 2020 of 0.98. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $15.51. The 10 year low, median, and high median Price/Graham Price Ratios are 0.73, 0.80 and 0.86. The current P/GP Ratio is 0.83 based on a stock price of $12.92. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.11. The current P/B Ratio is 1.18 based on a stock price of $12.92, Book Value of $462.9M and a Book Value per Share of $10.91. The current ratio is 6.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 11.67. The current P/B Ratio is 9.71 based on the Cash Flow for the last 12 months of $56.4M, Cash Flow per Share of $1.33 and a stock price of $12.92. The current ratio is 17% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 7 year and historical median dividend yield of 7.16%. The current dividend yield is 6.97% based on dividends of $0.90 and a stock price of $12.92. The current dividend yield is 2.7% below the 7 year and historical median dividend yield. 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 8.18 based on Revenue estimate for 2020 of $66.4M, Revenue per Share of $1.58 and a stock price of $12.92. The current ratio is 2.8% above the 10 year median ratio. 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 reasonable. Both the dividend yield test and the P/S Ratio test show the stock price as reasonable but above the median, but they are both above the median by less than 3%. All the tests seem to say the same thing, that the stock price is reasonable, but above the median.
Is it a good company at a reasonable price? The stock price is probably reasonable but at the high end of reasonable. I like this company but being in specialty mortgages it is a higher risk than banks. Also, the dividends are taxed as interest, so this is a good stock for an RRPS or TFSA. I have mine in my RRSP. Also, a big portion of your return will be in dividends, rather than capital gains. This is company is rated at a Medium risk level.
When I look at analysts’ recommendations, I find Strong Buy (1) and Buy (2). The consensus would be a Buy. The 12 month price consensus is $13.77. This implies a total return of 13.54% with 6.58% from capital gains and 6.97% from dividends.
There are no entries on Stock Chase as this is a small company. Nikhil Kumar on Motley Fool says the company has done well for investors with stable and secure dividends. Adam Othman on Motley Fool thinks this is a good stock for your TFSA. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5. They also say that dividends are not well covered. However, this site does rather surface analysis and does not look deeply into how businesses are run. TD Securities says the dividends are well supported. With this stock, I go with TD Securities analysis on dividend coverage. A writer on Simply Wall Street says the CEO of this company is paid under the Industry’s median and he has skin in the game with his personal holdings in the company. The company’s CEO is interviewed on Canadian Business Spotlight.
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. 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 TFI International Inc (TSX-TFII, OTC-TFIFF) ... learn more on Wednesday, March 3, 2021 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks March 2021.... learn more on Tuesday, March 2, 2021 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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