Yahoo Finance First National Financial's (TSE:FN) Dividend Will Be CA$0.20
The board of First National Financial Corporation (TSE:FN) has announced that it will pay a dividend on the 14th of April, with investors receiving CA$0.20 per share. Based on this payment, the dividend yield on the company's stock will be 6.4%, which is an attractive boost to shareholder returns.
See our latest analysis for First National Financial
First National Financial's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, First National Financial was paying out 73% of earnings, but a comparatively small 29% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to fall by 2.4%. If recent patterns in the dividend continue, we could see the payout ratio reaching 79% in the next 12 months, which is on the higher end of the range we would say is sustainable.
First National Financial Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from CA$1.25 total annually to CA$2.40. This means that it has been growing its distributions at 6.7% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
First National Financial May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Although it's important to note that First National Financial's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Our Thoughts On First National Financial's Dividend
Overall, a consistent dividend is a good thing, and we think that First National Financial has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign 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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