BayFirst Financial (NASDAQ:BAFN) Has Affirmed Its Dividend Of $0.08

The board of BayFirst Financial Corp. (NASDAQ:BAFN) has announced that it will pay a dividend of $0.08 per share on the 15th of December. This payment means the dividend yield will be 2.5%, which is below the average for the industry.

See our latest analysis for BayFirst Financial

BayFirst Financial's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

BayFirst Financial is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Taking data from BayFirst Financial's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with some room to spare.

Unless the company can turn things around, EPS could fall by 10.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 53%, which is definitely feasible to continue.

BayFirst Financial Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2020, the annual payment back then was $0.179, compared to the most recent full-year payment of $0.32. This means that it has been growing its distributions at 16% per annum 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.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. BayFirst Financial's EPS has fallen by approximately 10% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about BayFirst Financial's payments, as there could be some issues with sustaining them into the future. While BayFirst Financial is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think BayFirst Financial is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for BayFirst Financial (1 doesn't sit too well with us!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.