First National Financial's (TSE:FN) Dividend Will Be CA$0.1958

First National Financial Corporation (TSE:FN) has announced that it will pay a dividend of CA$0.1958 per share on the 15th of September. This makes the dividend yield 9.6%, which will augment investor returns quite nicely.

Check out our latest analysis for First National Financial

First National Financial Will Pay Out More Than It Is Earning

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 Financial has a long history of paying out a part of its earnings to shareholders. Based on First National Financial's last earnings report, the payout ratio is at a decent 70%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 2.5% over the next year. And if the dividend continues along the path it has been on recently, the future payout ratio in 12 months could be 116%, which is definitely a bit high to be sustainable going forward.

historic-dividend

First National Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CA$1.60 in 2012 to the most recent total annual payment of CA$3.60. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. First National Financial has seen earnings per share falling at 2.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On First National Financial's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments First National Financial has been making. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for First National Financial that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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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