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

The board of First National Financial Corporation (TSE:FN) has announced that it will pay a dividend of CA$0.1958 per share on the 15th of November. This makes the dividend yield 9.9%, which will augment investor returns quite nicely.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

First National Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First National Financial's last earnings report, the payout ratio is at a decent 70%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 2.5% over the next 3 years. Despite that, future payout ratio in that same time horizon is forecasted by analysts to be 81%, meaning that most of earnings is being paid out to shareholders.

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 implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

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. However, initial appearances might be deceiving. First National Financial has seen earnings per share falling at 2.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On First National Financial's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about First National Financial's payments, as there could be some issues with sustaining them into the future. 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 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. 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.