First National Financial (TSE:FN) Is Increasing Its Dividend To CA$0.75

First National Financial Corporation (TSE:FN) will increase its dividend from last year's comparable payment on the 15th of December to CA$0.75. This will take the dividend yield to an attractive 6.3%, providing a nice boost to shareholder returns.

View our latest analysis for First National Financial

First National Financial's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, First National Financial was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 10.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

First National Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from CA$1.3 total annually to CA$2.40. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

First National Financial Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that First National Financial has been growing its earnings per share at 6.9% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like First National Financial's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for First National Financial that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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