BayFirst Financial Corp. (NASDAQ:BAFN) will pay a dividend of $0.08 on the 15th of September. The dividend yield is 2.2% based on this payment, which is a little bit low compared to the other companies in the industry.
View our latest analysis for BayFirst Financial
BayFirst Financial's Payment Expected To Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
BayFirst Financial has a short history of paying out dividends, with its current track record at only 3 years. While it has a shorter history of paying out dividends, BayFirst Financial's payout ratio of 19% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Looking forward, earnings per share could rise by 5.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 22% by next year, which is in a pretty sustainable range.
BayFirst Financial Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.179 in 2020 to the most recent total annual payment of $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
We Could See BayFirst Financial's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that BayFirst Financial has grown earnings per share at 5.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
Overall, we think BayFirst Financial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for BayFirst Financial (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.