First National Financial Corporation (TSE:FN) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 30th of March to receive the dividend, which will be paid on the 15th of April.

First National Financial's next dividend payment will be CA$0.16 per share, on the back of last year when the company paid a total of CA$1.95 to shareholders. Last year's total dividend payments show that First National Financial has a trailing yield of 8.4% on the current share price of CA$23.17. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! 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 (66%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see First National Financial's earnings per share have risen 12% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. First National Financial has delivered 3.7% dividend growth per year on average over the past ten years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is First National Financial worth buying for its dividend? Earnings per share are growing nicely, and First National Financial is paying out a percentage of its earnings that is around the average for dividend-paying stocks. First National Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while First National Financial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for First National Financial and you should be aware of this before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.