Yahoo Finance Here's Why We're Wary Of Buying First National Financial's (TSE:FN) For Its Upcoming Dividend
Readers hoping to buy First National Financial Corporation (TSE:FN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, First National Financial investors that purchase the stock on or after the 30th of March will not receive the dividend, which will be paid on the 14th of April.
The company's next dividend payment will be CA$0.20 per share. Last year, in total, the company distributed CA$2.40 to shareholders. Calculating the last year's worth of payments shows that First National Financial has a trailing yield of 6.3% on the current share price of CA$38.16. If you buy this business for its dividend, you should have an idea of whether First National Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for First National Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. First National Financial paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about First National Financial's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, First National Financial has increased its dividend at approximately 6.7% a year on average.
Final Takeaway
Has First National Financial got what it takes to maintain its dividend payments? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with First National Financial. To help with this, we've discovered 1 warning sign for First National Financial that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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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