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 7th of June. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

View our latest analysis for First National

First National's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, First National has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 42%, which means that First National would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 23.1%. If the dividend continues along recent trends, we estimate the future payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

First National Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.10 in 2014, and the most recent fiscal year payment was $0.60. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though First National's EPS has declined at around 6.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, a consistent dividend is a good thing, and we think that First National has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 2 warning signs for First National 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.