Nobody is stunned if many Canadian traders personal shares of the nation’s Massive Six banks. The monetary disaster in 2008–09 was the litmus check; all of them emerged unscathed in comparison with their US counterparts. Any of those financial institution shares may be an anchor in an funding portfolio.
Whereas regulatory requirements to make sure stability didn’t change, the market dynamics did. Non-bank lenders, significantly mortgage funding company (MICs), have change into an alternative choice to financial institution shares.
Anybody investing for earnings could wish to think about MCAN Mortgage Company (TSX:MKP) and Atrium (TSX:AI). Their core enterprise is mortgage lending. Apart from the comparatively low-cost share costs, these MICs have larger dividend yields than the Massive Banks. Efficiency-wise, the shares have been remarkably regular all through this yr.
Resilient portfolio
MCAN takes pleasure in its resilient portfolio, however the prevailing market situations and associated uncertainties. Mortgage brokers and business companions assist the $868.3 million MIC serve shoppers and handle threat profiles. The supply for credit score losses (PCLs) has risen as a precautionary measure, though delinquencies stay insignificant.
The goal debtors are established builders with good observe data and credit score historical past. These shoppers change into repeat clients ultimately. MCAN’s lending actions are extremely concentrated round Alberta, B.C., and Ontario, the place demand for builders is powerful and housing is extra inexpensive.
In Q2 2025, web earnings elevated 2% and 22% to $20.2 million in comparison with Q2 2024 and Q1 2025, respectively. MCAN’s CEO, Derek Sutherland, stated, “We now have achieved progress in our residential mortgage portfolio with out sacrificing our credit score profile.”
Sutherland added that the diversified asset base generates sturdy shareholder returns throughout actual property market cycles. The benefit of MCAN and different MICs is that they’re extra acquainted and extra skilled in the true property sector than banks.
At $21.47 per share, the inventory is up 25.2% year-to-date, whereas traders partake within the beneficiant 7.6% dividend. MCAN’s dividend observe report is 29 years (1996 to 2025) and counting.
Low-risk profile
Atrium’s income has grown constantly alongside its mortgage portfolio since 2013. This $554.3 million MIC is extremely conservative to protect a low threat profile. The mortgages are secured by residential, multi-residential, and business actual property properties. Practically 97% of the full portfolio is first mortgages, with a median loan-to-value of 61.3%.
Within the first half of 2025, web earnings elevated 6% to $25 million, whereas provision for mortgage losses dropped 72% to $2.3 million from a yr in the past. Its CEO, Rob Goodall, stated, “We proceed to generate earnings per share properly above our dividend.”
When you make investments right now, AI trades at $11.26 per share (10.6%-plus year-to-date) and pays a profitable 8.3% dividend. Additionally, the payout frequency is month-to-month. Atrium started paying month-to-month dividends in 2020, and annually, the MIC declares particular dividends on prime of the common dividends. That payout is a good profit.
Canadian Earnings Tax Act
The Canadian Earnings Tax Act requires MICs to pay their web earnings to shareholders as dividends. By doing so, they will deduct the payouts from taxable earnings. The result’s considerably decrease earnings tax, if not zero. Whether or not you choose MCAN or Atrium, you’d have recurring earnings streams. Perhaps the deciding elements are the yield and payout frequency.
