This Stock Has Delivered 459% Gains — and Still Has Room to Grow

First National Financial Corp (TSX:FN) has quietly been one of the market’s best performers. Don’t miss out on this proven compounder.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the dirty little secrets of the stock market is a relatively small number of stocks end up delivering most of the entire market’s total return. Most stocks just languish, not contributing much at all to an index’s long-term results.

Once an investor realizes this, their whole approach often changes. Suddenly, previous returns matter. You’re much more likely to choose a stock with excellent long-term results, hoping to jump onto that bandwagon while it still has some momentum.

Personally, now that I know this, I’ve adjusted my investing style a little. I try to choose great companies that have been long-term wealth creators, rather than permanently cheap value stocks. I still insist on a reasonable price, of course. But I’m less focused on valuation than before.

Let’s take a closer look at a stock that has quietly delivered a 459% gain over the last decade — including reinvested dividends — that still has plenty of potential to get bigger.

An under-the-radar lender

Canada’s largest banks get the majority of investor attention, and for good reason. These companies have made countless investors rich over the years.

But focusing on the largest banks may not be the most profitable path going forward. It’s really hard for a big bank to grow its bottom line by more than 5-8% annually. A more specialized financial company can deliver better growth because it’s a smaller and more nimble organization.

First National Financial Corp (TSX:FN) is a fantastic example. It has grown to become Canada’s sixth-largest mortgage lender, with some $107 billion worth of mortgages under administration, all without opening a single bank branch.

The company originates all of its loans through mortgage brokers, which then communicate with a handful of regional offices. It’s a brutally efficient operation that keeps rates low — savings that are then passed onto customers. First National’s mortgage rates are usually among the lowest in the market.

Despite lackluster results from many of Canada’s top real estate markets during the first quarter, First National managed to grow Q1 revenue by 12%; its total mortgages under administration by 5% versus the same quarter last year. Investors should note that earnings were down approximately 30% on tighter interest margins, something that always happens as rates head lower. Management isn’t concerned however, citing a strong March as reason for optimism.

A dividend growth machine

First National has delivered stellar dividend growth since 2011, despite it paying out much of its earnings back to shareholders. The current yield is 6.2%.

The payout in 2011 was $1.25 per share on an annual basis. That payout has been hiked every year since, and is on pace to equal $1.90 per share in 2019. Investors should also remember the company has paid periodic special dividends, including $1.25 per share in 2017 and $1 per share in 2018.

You won’t find many stocks with this combination of current yield and historical dividend growth.

Stellar long-term returns

First National has quietly been one of the TSX Composite Index’ top stocks over the past decade. If you would have invested $10,000 in the company back on May 29, 2009 and held until today — while reinvesting dividends — your investment would have grown to $55,955. That’s a total return of 459%, or 18.78% annually.

Yes, I know the past decade has been a nice time to own stocks. But it’s still an impressive result, especially when you compare it to the index. The TSX Composite Index is up a little more than 100% over the last decade, including reinvested dividends. That’s a decent result, but nothing compared to First National’s greatness.

The company still has plenty of growth ahead of it, too. A typical year sees between $200 and $250 billion worth of new mortgages here in Canada, a number that will slowly increase over time as real estate continues to appreciate. As long as mortgage brokers stay competitive, First National will continue to get new business.

Should you invest $1,000 in First National Financial Corporation right now?

Before you buy stock in First National Financial Corporation, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and First National Financial Corporation wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $5,000? 5 Income Stocks to Buy and Hold Forever

These income stocks have a solid dividend-payout history that can help you earn stress-free passive income.

Read more »

grow money, wealth build
Dividend Stocks

Why I’d Invest $10,000 in This Undervalued Dividend-Growth Stock for Decades of Income

This undervalued dividend stock offers a high yield of over 8% and can help you earn more than $200 in…

Read more »