Over the past 10 years First National Financial Corporation (TSE:FN) has grown its dividend payouts from CA$1.35 to CA$1.9. With a market cap of CA$1.9b, First National Financial pays out 68% of its earnings, leading to a 5.9% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
First National Financial's dividend yield stands at 5.9%, which is high for Mortgage stocks. But the real reason First National Financial stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of FN it has increased its DPS from CA$1.35 to CA$1.9 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes FN a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 68%, which means that the dividend is covered by earnings. Going forward, analysts expect FN's payout to remain around the same level at 63% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 6.1%. In addition to this, EPS should increase to CA$2.86.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Investors of First National Financial can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then First National Financial is one worth keeping around. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I've compiled three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FN’s future growth? Take a look at our free research report of analyst consensus for FN’s outlook.
- Valuation: What is FN worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FN is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.