First National (NASDAQ:FXNC) Is Due To Pay A Dividend Of $0.15

First National Corporation (NASDAQ:FXNC) has announced that it will pay a dividend of $0.15 per share on the 8th of September. Based on this payment, the dividend yield will be 3.5%, which is fairly typical for the industry.

View our latest analysis for First National

First National's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

First National has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 22% also shows that First National is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 27.8% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 38%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

First National Is Still Building Its Track Record

It is great to see that First National has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.60. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

First National 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 has impressed us by growing EPS at 9.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First National's prospects of growing its dividend payments in the future.

First National Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think First National might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 identified 2 warning signs for First National (1 is concerning!) that you should be aware of before investing. 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.