First National Financial Corp (FN.TO)

Hi, would like additional insight on First National Financial Corp (FN.TO). Had a nice run-up pre-covid before it had a severe correction followed by a V shaped recovery to a recent all time high. With many of the banks recovering to pre-covid levels and insurance not too far behind it seems there is still room to run with the current hot real estate market.

They also seemed to generally perform well throughout COVID and pay almost a 5% dividend monthly. Curious on valuation and potential for growth. Earnings upcoming on March 2nd.

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Asked on February 14, 2021 2:20 pm

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Hi Jason,

I like First National - it is an alternative lender and as we've seen, these companies have done quite well over the past number of years. Likewise, they aren't under the purview of the OFSI so are actually able to raise dividends. FN did so last November when it raised dividends by 8% and extended its dividend growth streak to nine years. The dividend is well covered and is likely to extend its streak to 10-years in the fall of 2021. It also announced a hefty special dividend last year as well.

From a valuation perspective it is reasonably priced at only 11.63 times forward earnings. While this is above its own historical average of 10.26, the entire industry is trading at more expensive valuations. Besides, ~12 times forward earnings for a company that is expected to post growth in the low teems is quite reasonable. Not saying its going to post the same level of growth it did over the past couple of years, but there is no reason not to expect growth in the high single to the low teens.

Mat
Mat

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Posted by Mathieu Litalien

Answered on February 15, 2021 3:11 pm

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