Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SmartFinancial, Inc. (NASDAQ:SMBK) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 6th of November in order to be eligible for this dividend, which will be paid on the 23rd of November.
SmartFinancial's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Based on the last year's worth of payments, SmartFinancial stock has a trailing yield of around 1.3% on the current share price of $14.94. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether SmartFinancial can afford its dividend, and if the dividend could grow.
View our latest analysis for SmartFinancial
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. SmartFinancial is paying out just 10.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 21% per annum for the past five years.
Unfortunately SmartFinancial has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
From a dividend perspective, should investors buy or avoid SmartFinancial? Companies like SmartFinancial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, SmartFinancial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for SmartFinancial and you should be aware of it before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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