Kalkine Media - Monthly-pay dividend stocks hold a special allure for many investors, offering the prospect of high yields and more frequent payouts compared to their quarterly counterparts. However, when considering TSX dividend stocks, it's essential to discern the quality of the companies behind them. Not all monthly-pay dividend stocks are created equal; some may be associated with low-quality companies aiming to attract dividend investors with regular payouts.
Nevertheless, amidst the sea of monthly-pay dividend stocks, there are gems offered by reputable companies. In this article, we'll delve into one such stock available on the Toronto Stock Exchange (TSX) for less than $50: First National Financial (TSX:FN).
First National Financial
First National Financial (TSX:FN) is a Canadian non-bank lender, distinguishing itself by lending money without accepting deposits, thus not operating as a traditional bank. FN stands out as a monthly-pay dividend stock, boasting an impressive 6.6% yield.
The company primarily deals in both commercial and residential mortgages, funding these mortgages through bond issuances with typically longer terms to maturity. This strategy mitigates risk, especially when compared to traditional bank financing relying on chequing and savings accounts.
First National's business model hinges on partnerships with mortgage brokers, tapping into their networks to connect with individuals seeking favorable mortgage rates. This collaborative approach has proven effective in driving business growth for FN.
Financial Performance and Growth
First National Financial has demonstrated robust performance in recent years, reflected in its financial metrics:
- Revenue: $503.4 million, marking a notable 21.7% increase.
- Pre-fair market change income: $77 million, up by 29.5%.
- Net income: $44.2 million, a modest 2.85% increase.
- Diluted earnings per share (EPS): $0.72, reflecting a 2.85% rise.
- Mortgages under administration: $143.5 billion, indicating a healthy 9.54% growth.
While net income growth appears moderate, it's essential to note that fluctuations in loan market values influenced this figure. Excluding these fluctuations, FN's core income showed substantial improvement.
Potential Income for Investors
With a dividend yield of 6.6%, First National Financial presents an attractive income opportunity for investors. As a monthly-pay dividend stock, investors can anticipate regular payouts throughout the year. For instance, a $100,000 investment at a 6.6% yield translates to $6,600 in annual income.
Moreover, FN's track record of dividend growth, averaging 5.3% annually over the last five years, indicates the potential for further increases. With a modest payout ratio of 60%, FN has ample room to raise dividends, especially if earnings continue to expand.
Looking Ahead
First National Financial remains well-positioned to capitalize on its strong financial performance and strategic initiatives. Amidst prevailing high-interest rates, FN may explore additional dividend hikes in the future, bolstered by its solid earnings growth trajectory.