First National (NASDAQ:FXNC) Is Due To Pay A Dividend Of $0.15

First National Corporation (NASDAQ:FXNC) will pay a dividend of $0.15 on the 8th of September. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

See our latest analysis for First National

First National's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

First National has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 22% also shows that First National is able to comfortably pay dividends.

EPS is set to fall by 27.8% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 38%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

First National Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.60. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that First National has grown earnings per share at 9.6% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

First National Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for First National you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated 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.