First National's (NASDAQ:FXNC) Dividend Will Be Increased To $0.15

First National Corporation (NASDAQ:FXNC) will increase its dividend on the 10th of March to $0.15, which is 7.1% higher than last year's payment from the same period of $0.14. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

Check out our latest analysis for First National

First National's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

First National has a good history of paying out dividends, with its current track record at 9 years. While past data isn't a guarantee for the future, First National's latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 31.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 30% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

First National Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of $0.10 in 2014 to the most recent total annual payment of $0.56. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First National has been growing its earnings per share at 15% a year over the past five years. First National definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

First National Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 3 warning signs for First National you should be aware of, and 1 of them is a bit unpleasant. Is First National 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.