Q: I am considering starting a position in First National Financial Corp., Canada. It is dealing with mortgage financing with a healthy yield around 6%. Information that I have found indicates 70% ownership by principal owners so that liquidity may not be great. Is this company worth adding to an income focused portfolio? My other financials are Canadian banks, BN, BAM, AD,UN
5i Research Answer:
FN management is very astute in the financial services industry and we think it is a good income investment. It is fairly small and entirely dependent on mortgages and sensitive to the economy and interest rates, so these are risks to consider. But it is cheap at only 9X earnings, the dividend is attractive and has shown some growth, and it has a decent history of relatively-steady growth. We think it could be added to larger financial stocks for diversification, but we would consider more income focused than growth.