AI:CC - Buy 1334 Shares of This Top Dividend Stock for $100/Month in Passive Income

2024-07-16 16:40:00 ET

There are several ways to create a steady and recurring passive-income stream. However, investing in quality dividend stocks with a monthly payout is a low-cost passive-income strategy. As dividends are not guaranteed, it’s crucial to identify companies that are positioned to thrive across market cycles and increase these payouts over time. Here’s one such TSX dividend stock you can buy for monthly passive income in 2024. Let’s dive deeper.

An overview of Atrium Mortgage Investment

Valued at $488 million by market cap , Atrium Mortgage Investment ( TSX:AI ) is a Canada-based mortgage lender that provides residential and commercial mortgage services. These include mortgage loans such as land and development financing, construction and mezzanine financing, and commercial term and bridge financing services for residential and commercial properties.

It invests in commercial and residential mortgages while maintaining a scalable yield on its portfolio. The company manages risk by maintaining a diversified mortgage portfolio, conservating underwriting processes, and aggressive mortgage services.

Atrium’s mortgage amount ranges between $300,000 and $30 million, and the interest rate is between 8.49% and 14%. It ended the first quarter (Q1) of 2024 with a weighted average loan-to-value ratio on its mortgage portfolio of 64% and an average interest rate of 11.25%.

How has Atrium Mortgage Investment stock performed?

A red-hot mortgage market in Canada meant the demand for loans across verticals was robust in the past two decades. Alternatively, interest rate hikes over the last two years have dragged valuations of Atrium Mortgage and its peers significantly lower.

Since July 2014, Atrium Mortgage stock has been rangebound. It currently offers shareholders a monthly dividend of $0.075 per share, translating to a yield of 8.2%. So, if we adjust for dividend reinvestments, the TSX dividend stock has returned close to 120% in the last decade.

How did Atrium Mortgage Investment perform in Q1 of 2024?

Atrium reported earnings per share of $0.27 in Q1 of 2024, while it paid shareholders cumulative dividends of $0.225 per share. Its lending program targeted lower-risk sectors to protect shareholder capital amid the ongoing downturn.

It reported revenue of $25.19 million in the March quarter, up from $23.7 million in the year-ago period. Atrium’s mortgage receivables also rose from $840 million to $867 million in the last 12 months.

The company explained that despite its strong performance in Q1, it increased its allowance for mortgage losses due to near-term challenges in the Canadian real estate market.

Atrium chief executive officer Rob Goodall explained, “While the prospect of lower rates and easing inflation in the second half of the year should improve market conditions, we intend to remain diligent in managing the existing portfolio and continue to focus on our preferred sectors for new loan business.”

Priced at less than 10 times forward earnings , Atrium Mortgage stock is quite cheap. Analysts, too, remain bullish and expect it to surge almost 20% in the next 12 months, given consensus price target estimates.

The Foolish takeaway

You need to buy 1,334 shares of Atrium Mortgage to earn $100 per month in dividend income. This investment would cost you roughly $14,700, which is quite steep. Investors need to identify other quality dividend stocks and diversify their portfolios further to lower overall risk.

The post Buy 1,334 Shares of This Top Dividend Stock for $100/Month in Passive Income appeared first on The Motley Fool Canada .

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

2024