SmartFinancial, Inc. (NASDAQ:SMBK) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 6th of February in order to receive the dividend, which the company will pay on the 21st of February.
SmartFinancial's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Calculating the last year's worth of payments shows that SmartFinancial has a trailing yield of 0.9% on the current share price of $21.62. If you buy this business for its dividend, you should have an idea of whether SmartFinancial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. SmartFinancial has a low and conservative payout ratio of just 2.6% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see SmartFinancial's earnings have been skyrocketing, up 27% per annum for the past five years.
This is SmartFinancial's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
Should investors buy SmartFinancial for the upcoming dividend? Companies like SmartFinancial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, SmartFinancial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of SmartFinancial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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