SmartFinancial (NASDAQ:SMBK) Will Pay A Dividend Of $0.08
The board of SmartFinancial, Inc. (NASDAQ:SMBK) has announced that it will pay a dividend of $0.08 per share on the 28th of August. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
See our latest analysis for SmartFinancial
SmartFinancial's Earnings Will Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Having paid out dividends for only 4 years, SmartFinancial does not have much of a history being a dividend paying company. Based on its last earnings report however, the payout ratio is at a comfortable 11%, meaning that SmartFinancial may be able to sustain this dividend for future years if it continues on this earnings trend.
Looking forward, earnings per share is forecast to fall by 14.1% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 17%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
SmartFinancial Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2019, the dividend has gone from $0.20 total annually to $0.32. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. SmartFinancial has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. SmartFinancial has seen EPS rising for the last five years, at 25% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
SmartFinancial Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for SmartFinancial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
