First National Financial (TSE:FN) Is Paying Out A Dividend Of CA$0.2042

The board of First National Financial Corporation (TSE:FN) has announced that it will pay a dividend of CA$0.2042 per share on the 15th of April. This means the annual payment is 6.7% 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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, First National Financial's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 10.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 73% 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 2014, the annual payment back then was CA$1.40, compared to the most recent full-year payment of CA$2.45. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

First National Financial Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First National Financial has seen EPS rising for the last five years, at 8.8% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for First National Financial (of which 1 is a bit concerning!) you should know about. Is First National Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.