First National Financial (TSE:FN) Has Affirmed Its 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 September. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for First National Financial

First National Financial's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by First National Financial's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 36.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

First National Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was CA$1.3, compared to the most recent full-year payment of CA$2.40. This implies that the company grew its distributions at a yearly rate of about 6.3% 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 could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. First National Financial is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like First National Financial's Dividend

Overall, we like to see the dividend staying consistent, and we think First National Financial might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for First National Financial that investors should take into consideration. 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.