If you’re looking to turn your Tax-Free Savings Account (TFSA) into a steady stream of tax-free passive income, First National Financial (TSX:FN) could be a strong contender. As one of Canada’s largest non-bank mortgage originators and underwriters, First National has built a reputation for delivering consistent dividends, thus making it an attractive choice for investors seeking reliable cash flow, especially for predictable monthly income.
Why First National
First National recently released its third-quarter 2024 earnings, and while revenue saw a slight decline, the dividend stock remains on solid footing. Mortgages Under Administration (MUA) climbed to $150.6 billion, a 6% increase year over year, highlighting the company’s ability to maintain growth despite a shifting economic landscape.
Revenue for the quarter came in at $560.4 million, reflecting a minor 1% dip compared to the same period last year. However, this decline wasn’t enough to shake the company’s confidence in its ability to reward shareholders. In October 2024, the Board of Directors increased the regular monthly dividend to an annualized rate of $2.50 per common share – up from $2.45, and with a special dividend of $0.50 per common share. This move underscores the company’s strong financial health and commitment to delivering value to its investors.
Over the past year, First National’s stock has demonstrated resilience, with a modest gain of approximately 2.5%. While this may not seem dramatic, it’s important to remember that income investors are primarily interested in the company’s dividend consistency. The stock’s price-to-earnings (P/E) ratio currently stands at 10, suggesting that it remains fairly valued relative to its earnings.
A TFSA workhorse
For TFSA investors, First National’s dividend yield is particularly attractive. The company currently offers a trailing annual dividend yield of around 6.2%, which is well above the average for TSX-listed stocks. The recent dividend hike only adds to its appeal, reinforcing its status as a solid income-generating asset. The fact that dividends earned within a TFSA are entirely tax-free makes this yield even more valuable, allowing investors to pocket the full amount without worrying about tax deductions.
Including First National in a TFSA portfolio is a strategic move for those aiming to average a set amount of monthly income. The company’s history of stable payouts and responsible financial management suggests that its dividends are sustainable over the long term. While no investment is entirely risk-free, First National’s strong balance sheet and consistent profitability make it one of the more dependable mid-cap dividend stocks available.
That being said, investors should always consider diversification when building a TFSA income portfolio. While First National offers a great opportunity for passive income, pairing it with other high-yielding stocks across different sectors can help spread risk and provide additional stability. A well-balanced mix of financials, utilities, REITs, and energy stocks can create a reliable income stream without overexposure to any single industry.
Foolish takeaway
Before making any investment decision, it’s always wise to conduct thorough research and ensure that your choices align with your financial goals. Consulting with a financial advisor can also provide valuable insights, especially when structuring a portfolio designed for long-term passive income. The key is to focus on companies with strong fundamentals and a proven track record of rewarding shareholders. So how much could a $20,000 investment in First National create in monthly income?
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| FN | $39.90 | 501 | $2.50 | $1,252.50 | monthly | $20,000 |
First National Financial Corporation continues to stand out as a solid option for investors looking to maximize their TFSA’s income potential, especially when it offers $104.38 in monthly dividend income! Its reliable dividends, reasonable valuation, and positive growth outlook make it a compelling pick for those who want to enjoy tax-free passive income without taking on excessive risk. By investing in stocks like FN, TFSA holders can build a portfolio that delivers consistent, worry-free returns month after month.
