On today's TSX Breakouts report, there are 44 stocks on the positive breakouts list (stocks with positive price momentum), and eight securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appears on the positive breakouts list. However, for patient investor seeking income (the yield is attractive at 7 per cent), I recommend waiting for the stock price to pullback before accumulating shares. There may be a more attractive entry point in the future for investors.
Furthermore, given the stock's low liquidity, the share price can be volatile. To illustrate, on Monday, the share price had an intra[day swing of 2 per cent, peaking at $12.62 and dipping down to $12.37 during the day. The security I am referring to is Atrium Mortgage Investment Corp. (AI-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Mortgage Investment Corporation
Toronto-based Atrium Mortgage Investment Corp. is a mortgage lender that specializes in providing loans outside of the traditional lending environment.
Loans are offered at annual interest rates principally between 7.5 per cent and 10 per cent. The weighted average interest rate on the mortgage portfolio was 8.3 per cent as of Sept. 30.
Loan terms are short, generally one or two-years in length, allowing Atrium to adjust rates within their loan portfolio more frequently. Atrium provides financing on a variety of properties such as residential, commercial, and development projects. Its mortgage portfolio is comprised mostly of first mortgages, representing 83 per cent. As at September 30, the majority of loans focused in the Greater Toronto Area, representing 66 per cent of the company's mortgage portfolio, followed by British Columbia that accounted for 24 per cent of the total mortgage portfolio.
After the market closed on Oct. 26, Atrium reported third-quarter financial results that were relatively in-line with expectations.
Reported earnings per share was 23 cents per share, a penny shy of expectations. At quarter end, the company had $623-million of mortgages receivables, up from $521-million last year. The company's mortgage portfolio continues to steadily increase, exceeding $600-million for the first time in the company's history. In the earnings release, the Chief Executive Officer Rob Goodall commented on the company's financial performance stating, "We had a record level of loan advances during the quarter, at $105 million, which resulted in our portfolio exceeding $600-million for the first time. The new loans continue to be deliberately diversified by real estate sector. In the third quarter, loans were funded in low-rise residential developments (37 per cent), commercial real estate (28 per cent), single family mortgages (19 per cent), high rise residential developments (10 per cent) and construction loans (7 per cent). We continue to lend conservatively, so that our overall loan-to-value ratio remains at historically low levels." The average loan-to-value ratio stood at 61 per cent.
In Sept,, the company completed a bought deal financing, raising $30-million through the issuance of 2,532,000 shares at a price of $11.85 per share. Proceeds were earmarked to fund future mortgage loan opportunities.
Atrium is scheduled to reported its fourth-quarter financial results on Feb. 8. Both analysts who cover the security are anticipating earnings per share of 24 cents.
Atrium pays its shareholders a monthly dividend of 7.3333 cents per share, or 87.996 cents per share yearly. This equates to an annualized dividend yield of 7 per cent.
As a mortgage investment corporation, Atrium does not pay corporate tax on earnings. Instead, its earnings are distributed to shareholders as interest income and taxed accordingly. Consequently, Atrium pays a special dividend each year to its shareholders in order to maintain its status as a MIC.
Last year, a special dividend of 10 cents per share was distributed to shareholders of record on Dec. 31. The amount of the next special dividend will be announced when Atrium reports its year-end financial results on Feb. 8.
Since 2013, Atrium has increased its regular and special dividends each year. Its regular dividend totalled 86 cents in 2016, 84 cents in 2015, 82 cents in 2014 and 80 cents in 2013. The special dividend was 10 cents in 2016, 9 cents in 2015, 7 cents in 2014 and 5 cents in 2013.
There are two analysts that cover this small-cap security with a market capitalization of $412-million.
The analyst at TD Securities has a "hold" recommendation, a call that he has maintained since he launched coverage on Atrium in 2015.
The analyst at Industrial Alliance has a "buy" recommendation on Atrium.
Analysts have maintained their expectations throughout 2017. There have been no changes to their recommendations or target prices.
Graham Ryding, the analyst at TD Securities, has a target price of $12.50, suggesting the security is fairly valued. Dylan Steuart at Industrial Alliance Securities has a target price of $13.
The Street is forecasting earnings per share of 95 cents in 2017, rising to 98 cents in 2018, and forecast to reach $1.03 in 2019. Looking back, reported earnings per share was 95 cents in 2016, 93 cents in 2015, and 91 cents in 2014.
Earnings forecasts have declined over the year. For instance, at the beginning of 2017, the consensus earnings estimates were 99 cents for 2017 and $1.04 for 2018.
Insider transaction activities
There have been no transactions in the public market reported by insiders so far in the second half of 2017.
Looking at the share price over the past several years, it has been locked in a range, trading principally between $11 and $12.50. Year-to-date, the share price is up 3 per cent and is currently at the top end of its historical trading band.
Looking at key overhead resistance and downside support levels, there is significant overhead resistance around $12.80, near its record closing high of $12.79. There is initial downside support around $12, near its 200-day moving average (at $12.14). Failing that, there is support around $11.70 and strong support at $11.
The security is thinly traded, the three-month historical daily average trading volume is approximately 46,000 shares. Low liquidity can lead to volatility in the share price. For instance, on Monday, the stock dipped down to an intraday low of $12.37 and peaked at $12.62 during the day, representing a 2 per cent swing in the share price.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
|Positive Breakouts||Dec. 18 close|
|ALC-T||Algoma Central Corp||14.88|
|ADW.A-T||Andrew Peller Ltd||14.45|
|AI-T||Atrium Mortgage Investment Corp.||12.55|
|BMO-T||Bank of Montreal||100.97|
|BEP.UN-T||Brookfield Renewable Energy Partners LP||44.96|
|CF-T||Canaccord Genuity Group Inc||5.11|
|WEED-T||Canopy Growth Corp.||20.62|
|CWX-T||CanWel Building Materials Group Ltd.||7.29|
|CIX-T||CI Financial Corp||29.54|
|MJN-T||Cronos Group Inc.||5.09|
|DRT-T||DIRTT Environmental Solutions||6.76|
|DRG.UN-T||Dream Global Real Estate Investment Trust||12.28|
|ENGH-T||Enghouse Systems Ltd||59.54|
|EQB-T||Equitable Group Inc||70.36|
|FR-T||First Majestic Silver Corp||9.72|
|FVI-T||Fortuna Silver Mines Inc||6.3|
|GMP-T||GMP Capital Inc||3.02|
|GCG.A-T||Guardian Capital Group Ltd||26.62|
|HLF-T||High Liner Foods Inc||14.94|
|HNZ-T||HNZ Group Inc||18.635|
|HSE-T||Husky Energy Inc||16.94|
|LIF-T||Labrador Iron Ore Royalty Corp||25.88|
|LIQ-T||Liquor Stores N.A. Ltd||10.59|
|LIX-T||Lithium X Energy Corp.||2.49|
|LUC-T||Lucara Diamond Corp||2.65|
|MG-T||Magna International Inc||73.31|
|MEQ-T||Mainstreet Equity Corp||41.53|
|MFI-T||Maple Leaf Foods Inc||36.94|
|MRE-T||Martinrea International Inc||15.78|
|MUX-T||McEwen Mining Inc.||2.69|
|NOA-T||North American Energy Partners Inc.||5.92|
|RFP-T||Resolute Forest Products Inc.||13.32|
|RME-T||Rocky Mountain Dealerships Inc||13.94|
|SOX-T||Stuart Olson Inc||7.16|
|TECK.B-T||Teck Resources Ltd||31.05|
|AUP-T||Aurinia Pharmaceuticals Inc||5.96|
|HSM-T||Helius Medical Technologies Inc.||2.76|
|HWO-T||High Arctic Energy Services Inc||3.72|
|MRT.UN-T||Morguard Real Estate Investment Trust||13.57|
|RCI.B-T||Rogers Communications Inc||64.28|
|TOU-T||Tourmaline Oil Corp||20.59|
Source: Jennifer Dowty/Bloomberg