First National Financial (TSE:FN) Will Pay A Dividend Of CA$0.2042

First National Financial Corporation's (TSE:FN) investors are due to receive a payment of CA$0.2042 per share on 15th of July. This means the annual payment is 6.9% of the current stock price, which is above the average for the industry.

View our latest analysis for First National Financial

First National Financial's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. First National Financial was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

EPS is set to fall by 8.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 84%, which is definitely on the higher side.

First National Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$1.40 in 2014, and the most recent fiscal year payment was 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that First National Financial has grown earnings per share at 12% per 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.

In Summary

Overall, a consistent dividend is a good thing, and we think that First National Financial has the ability to continue this into the future. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for First National Financial that investors should take into consideration. Is First National Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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