Is it a good company at a reasonable price? There are quite varying views on this company. Some like it and some do not. I have it in my RSP because of the high dividends and the fact that the dividends are classified an Interest Income by Revenue Canada. TD WebBroker classifies this company as a median risk. Others think differently. The price could be cheap, but it may just be reasonable. I like the company, but I do realize that there are varying views about this company. It may not be a stock for everyone.
I own this stock of Atrium Mortgage Investment Corp (TSX-AI, OTC-AMIVF). Most of the income from this stock is from dividends, which are taxed as interest income. This stock is good for diversification and appropriate for RRPS, RIF, or TFSA type accounts.
When I was updating my spreadsheet, I noticed a special dividend is paid every year. The company decides on this after the year end and it is paid in February of the following year. For example, the company says the special dividend for 2021 was $0.07. However, this special dividend was paid in February 2022. The dividend payable in February 2023 is higher than usual at $0.23.
When I look at growth, I can see that EPS growth is lower than Revenue, Net Income and Cash Flow. This is because of growth in the number of outstanding shares. The stock price is not growing.
|Year||Item||Tot. Growth||Per Year|
|5||Net Income Growth||59.44%||9.78%|
|5||Cash Flow Growth||55.52%||9.23%|
|5||Total Div Growth||-0.86%||-0.17%|
|5||Stock Price Growth||-16.78%||-3.05%|
|10||Net Income Growth||246.84%||13.24%|
|10||Cash Flow Growth||344.54%||16.09%|
|9||Total Div Growth||32.29%||3.16%|
|10||Stock Price Growth||-2.05%||-0.20%|
If you had invested in this company in December 2012, for $1,007.40 you would have bought 92 shares at $10.95 per share. In December 2022, after 10 years you would have received $843.17 in dividends. The stock would be worth $987.16. Your total return would have been $1,830.33.
|Cost||Tot. Cost||Shares||Years||Dividends||Stock Val||Tot Ret|
I had had this stock since 2018, 5 years ago. I have made a total return of 10.37% per year with 2.50% from capital gains and 7.87% from dividends. If I exclude my recent purchase in January of this year, by total return if 9.49% with 1.60% from capital gains and 7.89% from dividends.
The dividend yields are high with dividend growth non-existent, but with Special dividends. The current dividend yield is high (7% and higher) at 7.30% per year. The 5 year median dividend yield is good (5% to 6% ranges) at 6.87%. The 9 year and historical median dividend yield are high at 7.16%. The dividends have been flat since 2018. However, every year this company pays a special dividend. It is assessed at the ends of the year and paid in the following February. The special dividend could vary a lot from year to year.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for EPS is 92% with 5 year coverage at 97%. The DPR for 2022 for Cash Flow per Share is $78% with 5 year coverage at 74%. The DPR for 2022 for Free Cash Flow for 2022 is 91% with 5 year coverage at 87%.
Debt Ratios are good. The Long Term Debt/Market Ratio for 2022 is 0.81. It is fine but a bit high. I calculate the Liquidity Ratio for 2022 to be 9.24, but this is not an important ratio for financials. The Debt Ratio is very good at 2.19. The Leverage and Debt/Equity Ratios are low and good at 1.84 and 0.84.
The Total Return per year is shown below for years of 5 to 13 to the end of 2022. 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.|
The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.63, 13.85 and15.06. The corresponding 10 year ratios are 11.80, 12.56 and 13.56. The corresponding historical ratios are 11.78, 12.71 and 13.64. The current P/E Ratio is 11.63 based on a stock price of $12.33 and EPS estimate for 2023 of $1.06. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $16.18. The 10-year low, median, and high median Price/Graham Price Ratios are 0.74, 0.79 and 0.87. The current P/GP Ratio is 0.76 based on a stock price of $12.33. The current ratio is between the low and median ratios of the 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.14. The current P/B ratio is 1.12 based on a Book Value of $475.6M, Book Value per Share of $10.97 and a stock price of $12.33. The current ratio is 1.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an estimate for the Book Value per Share for 2023 of $11.10. This implies a ratio of 1.11 and Book Value of $481M with a stock price of $12.33. This ratio is 2.6% 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 10-year median Price/Cash Flow per Share Ratio of 11.18. The current P/CF Ratio is 9.20 based on Cash Flow for the last 12 months of $58.1M, Cash Flow per Share of $1.34 and a stock price of $12.33. The current ratio is 18% 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 9 year and historical median dividend yield of 7.16%. The current dividend yield is 7.30% based on a stock price of $12.33 and dividends of $0.90. The current dividend yield is 2% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The interesting thing about this company’s dividend is that they have been giving a special dividend each year. If you compared the current total dividend yield with the 9 year median total dividend yield you get a different answer. The 9 year median total dividend yield is 7.68%. The total current dividend yield is 9.16%. This yield is 19% above the 9 year median total dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 7.96. The current P/S Ratio is 5.94 based on Revenue estimate for 2023 of $89.9M, Revenue per Share of $2.07 and a stock price of $12.33. The current ratio is 25% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably cheap, although it could be just reasonable. The main dividend testing says reasonable, but when you factor in the special dividends, the stock price looks cheap. The P/S Ratio test says the stock price is cheap. Although most of the testing is showing the stock price as reasonable and below the median, but the P/E Ratio test is showing the stock price as cheap.
When I look at analysts’ recommendations, I find Strong Buy (1) and Buy (2). The consensus would be a Buy. The 12 month stock price consensus is $13.63. This implies a total return of 17.84% with 10.54% from capital gains and 7.30% from dividends based on a current price of $12.33.
No analysts on Stock Chase is following this stock. Stock Chase gives this company 1 star out of 5. It is not on the Money Sense list. Vishesh Raisinghani on Motley Fool worries about the sustainability of this company’s dividends. Amy Legate-Wolfe on Motley Fool thinks this is the stock you should have. The company put out a press release on Newsfile for their four quarter of 2022.
Simply Wall Street via Yahoo Finance talks about this company’s dividends. Simply Wall Street has one warning of unstable dividend track record. (Note: the cut was to the special dividends, which can vary. The regular dividend has not been cut.) TD’s WebBroker says "We view Atrium as an attractive income investment with a defensive approach to lending and managing credit, and an experienced management team. We expect the record-high mortgage portfolio and mortgage rate to support higher earnings, and we believe that the dividend is well-supported."
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 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 TFI International Inc (TSX-TFII, OTC-TFIFF) ... learn more on Friday, March 3, 2023 around 5 pm. Tomorrow on my other blog I will write about Boomer’s Remorse.... learn more on Thursday, March 2, 2023 around 5 pm.
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