First National Financial (TSE:FN) Is Paying Out A Dividend Of CA$0.1958

First National Financial Corporation (TSE:FN) has announced that it will pay a dividend of CA$0.1958 per share on the 15th of August. Based on this payment, the dividend yield on the company's stock will be 9.9%, which is an attractive boost to shareholder returns.

See our latest analysis for First National Financial

First National Financial's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

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 72%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is forecast to rise by 6.4% over the next 3 years. Analysts estimate the future payout ratio could reach 78% over that same time period, which is on the higher side, but certainly still feasible.

First National Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CA$1.60 in 2012 to the most recent total annual payment of CA$3.60. This means that it has been growing its distributions at 8.4% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Although it's important to note that First National Financial's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On First National Financial's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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.