First National Financial (TSE:FN) Has Announced A Dividend Of CA$0.20

First National Financial Corporation (TSE:FN) has announced that it will pay a dividend of CA$0.20 per share on the 15th of March. The dividend yield will be 6.3% based on this payment which is still above the industry average.

See our latest analysis for First National Financial

First National Financial's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, First National Financial has a long history of paying out a part of its earnings to shareholders. Based on First National Financial's last earnings report, the payout ratio is at a decent 73%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 2.7% over the next 3 years. Despite that, future payout ratio in that same time horizon is forecasted by analysts to be 80%, meaning that most of earnings is being paid out to shareholders.

First National Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from CA$1.25 total annually to CA$2.40. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

First National Financial May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that First National Financial's earnings per share has fallen at approximately 3.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments First National Financial has been making. We don't think First National Financial is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for First National Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.