The Toronto Stock Exchange had a strong start this month, evidenced by the string of gains since May 1st. Yield-thirsty investors on the hunt for generous dividend payers have three lucrative options.
Atrium Mortgage Investment Corporation (TSX: AI), Acadian Timber (TSX: ADN), and InPlay Oil (TSX: IPO) fly under the radar, are outperforming the market, and have surprisingly strong dividends.
High-quality opportunities
Atrium deserves serious consideration following an exceptional year amid a challenging lending environment. The provider of residential and commercial mortgage services achieved several records last year. Because of its highest annual income in history, the $490.5 million non-bank lender declared a record special dividend ($0.29 per share).
In the 12 months ending December 2023, net income rose 11.1% year over year to a record $51.5 million versus 2022, despite the provision for mortgage losses rising 521.4% year over year to $11.9 million. The $893.6 million record mortgage portfolio represents a 3.2% increase from the prior year.
Notably, 94.6% of Atrium’s portfolio is first mortgages, while the average loan-to-value is 64.1%. Management seized high-quality opportunities due to reduced activity from institutional lenders.
Performance-wise, current investors are up 9% year to date. If you invest today, the share price is $11.16, while the dividend yield is 8.12%. The monthly payout, not quarterly, is an added enticement.
Profitable lumber and wood business
Acadian Timber owns vast freehold timberlands in New Brunswick and Maine. The $307.6 million company provides timber services and produces softwood and hardwood sawlogs, pulpwood, and biomass byproducts. It sells these products to regional customers.
The lumber and wood production industry is erratic, but Acadian has consistently delivered yearly profits amid headwinds. In Q1 2024, timber sales and services and net income increased 6.8% and 7.2% year over year to $23.9 million and $6 million, respectively. Notably, free cash flow (FCF) soared 108.7% to $7.8 million from a year ago.
According to its President and CEO, Adam Sheparski, timber sales volumes have rebounded at the start of the year. Also, Acadian recorded its first significant sale of carbon credits ($4.9 million) and entered a renewable energy option to lease.
Management expects the improving long-term demand for new homes, repair, and remodel activity to support the demand for Acadian’s products. At $18.08 per share (+7.2% year to date), the dividend offer is an attractive 6.51% (quarterly payout).
Ideal for frugal investors
InPlay Oil is a cheap option for yield-thirsty but frugal dividend investors. At only $2.53 per share (+10.5% year to date), the dividend yield is a hefty 7.59%. Like Atrium, this energy stock pays monthly dividends. Given the 50% payout ratio, the payout should be sustainable.
This $213.7 million company operates in West Central Canada, focusing on its concentrated light oil asset base in the Cardium Formation within the Pembina and Willesden Green pools. InPlay Oil has delivered positive earnings every year since 2020 during the oil price war and coronavirus breakout.
In Q4 2023, light oil production reached a quarterly record of 4,142 barrels per day (bbl/d), although net income declined 44.2% year over year to $11.6 million. For the year, InPlay returned $16.5 million to shareholders through the monthly base dividend and share repurchases.
Income boosters
Atrium Mortgage, Acadian Timber, or InPlay Oil are not typical anchors in a stock portfolio. However, they are excellent second-liners if you need a dividend or investment income boost.
