Invest $23,253 in This Stock for $110 in Monthly Passive Income

Dividend investors don’t need substantial capital to earn monthly passive income streams from an established dividend grower.

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Through dividend investing, anyone with money can become rich or make a fortune over time. This wealth-building strategy is best for income-focused investors, not day traders. Successful dividend investors don’t chase soaring stocks but instead pick dividend payers that transform a small investment into long-term, regular income streams.

An income stock

First National Finance Corporation (TSX:FN) in the financial services sector is a logical choice today. Besides its steady stock performance, the yield is generous, and the payout frequency is monthly. You hit two birds with one stone.  

Created with Highcharts 11.4.3First National Financial PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

At $44.04 per share, current investors are up 21% year-to-date and partake in the 5.7% dividend yield. A $23,353 investment, or 528 shares, translates into a $110 monthly passive income. See the table below:

CompanyRecent PriceNo. of SharesDiv Per Share*Total Payout*Frequency
First National$44.04528$2.50$1,320Monthly

*The dividend per share and total payout are annual; the monthly payout is $110 (total payout divided by 12)

Collect the monthly dividends and reinvest them by buying more shares if you don’t need the money yet. Assuming the yield is constant, your capital will nearly double or grow to $45,871 in 12 years. The monthly payout would be larger, or $217.

Business Overview   

First National, a $2.6 billion non-bank mortgage finance company, operates across Canada. It offers single-family, multi-unit residential and commercial mortgages. First National Financial LP is the originator, underwriter, and servicer of mortgages in the residential and commercial segments.

The finance company does not accept or take in deposits but raises funds for mortgage lending from several sources, including institutional placements, asset-backed commercial papers, and the National Housing Act Mortgage-Backed Securities and Canada Mortgage Bonds (CMB).

Management’s business strategy focuses on four key areas. First National provides a full range of mortgage solutions Canadians need while simultaneously growing assets under administration. The company leverages technology for business process enhancements and ease of service to mortgage brokers and borrowers. The last is to maintain a conservative risk profile.

First National considers its non-branch business model and proprietary information systems competitive advantages. However, the business is rate-sensitive. Real estate activity and mortgage volumes are generally low when interest rates are high. Falling interest rates are tailwinds because mortgage lending demand increases.

Positive development

In the three months ending September 30, 2024, net income declined 133.3% to $35.4 million compared to Q3 2023. At the quarter’s end, mortgages under administration (MUA) was $150.6 billion, 6% higher than a year ago. Fortunately, the Bank of Canada has reduced its policy rate four times since June 2024. 

Due to these rate movements, its President and CEO, Jason Ellis, said single-family residential mortgage commitments in Q3 2024 increased by 50%. First National is also well-prepared to execute its business plan.

Strong dividend track record

First National has earned dividend aristocrat status after five consecutive years of dividend hikes. The recent increase was 2%. Moreover, in addition to uninterrupted monthly dividend payments since 2006, the Board declares a special dividend when the finance company generates excess capital from operations.

Invest in this dividend grower today if you want to earn monthly passive income soon with only a small amount of capital.

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

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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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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