First National Financial Corporation: A Reliable Dividend Anchor in a Volatile Market

As Canadian mortgage volumes surge and interest rate uncertainty lingers, income investors face a dilemma: how to balance yield with safety. Enter First National Financial Corporation (TSX: FN), a top-3 non-bank mortgage originator whose $155 billion mortgage portfolio and 2.08% dividend increase in July 2025 position it as a defensive high-yield play. With a record dividend payout just weeks away, here's why investors should consider FN for their portfolios.

The Dividend Case: Sustainable Growth Amid Rising Mortgage Volumes

FN's dividend growth has been a quiet success story. In July 2025, the company raised its monthly dividend to $0.208334 per share, a 2.08% increase from $0.204167 in July 2024. While modest in percentage terms, this marks the 14th consecutive year of dividend growth, underscoring management's commitment to rewarding shareholders.

What supports this consistency? Look to the mortgage pipeline. FN's $155 billion mortgage portfolio—up 7% from $145 billion in 2024—is fueled by two key trends:
1. Single-Family Renewals: A wave of pandemic-era mortgages (originated in 2020) are now maturing, generating “gravy” fixed-fee revenue with minimal risk.
2. Commercial Growth: Insured multi-unit mortgages, boosted by affordable housing incentives, drove 18% YoY growth in commercial originations in Q1 2025.

These trends create a self-reinforcing cycle: larger portfolios mean more servicing fees, which fund dividends. Even with Q1 net income dipping to $24.6 million (from $49.9 million in 2024), FN's Pre-FMV Income (a non-GAAP metric excluding volatility) remained robust at $52.6 million, down just 16% year-over-year.

Why FN's Dividend is Low-Risk, High-Reliability

Critics might question dividend sustainability amid macroeconomic headwinds. FN's data offers reassurance:

• Delinquency Rates: At 9 basis points for prime mortgages and stabilized non-prime (Excalibur) delinquencies, credit quality remains pristine.
• Diversified Funding: FN relies on securitization, institutional investors, and third-party underwriting partnerships (e.g., BMO) to avoid overexposure to interest rate shifts.
• Profitability Drivers: Renewals and commercial mortgages generate higher margins than new originations, shielding profits from competitive pricing pressures.

Even the 158% GAAP payout ratio looks manageable when excluding non-cash items: the adjusted ratio sits at 98%, leaving ample room for dividends without stretching capital.

The Investment Thesis: A Defensive Play with Upside

FN's 4.3% dividend yield (based on its current share price) is compelling in a market where bonds and real estate are volatile. Its mortgage origination dominance—30% of Canada's non-bank market—and $155 billion under administration give it scale to weather downturns.

Key Risks:
- U.S. tariffs could dampen economic growth.
- Narrowing securitization spreads may pressure margins.

Why Buy Now?
The July 31 record date looms, and with FN's August 15 payout, investors who own shares by then lock in the 2.08% increased dividend. For income-focused investors, the combination of high yield, low delinquency exposure, and dividend growth makes FN a rare defensive gem.

Final Call: Secure the Dividend Before the Clock Runs Out

First National Financial Corporation isn't a high-growth tech stock—it's a high-yield anchor in a turbulent market. With its dividend safety bolstered by a growing mortgage portfolio and recession-resistant renewal revenue, FN offers income investors a rare blend of safety, yield, and stability.

Act before July 31 to secure the dividend. For portfolios seeking steady returns, FN's TSX: FN is a buy.

This analysis is for informational purposes only. Always conduct thorough due diligence before making investment decisions.