Stock Analysis

BayFirst Financial (NASDAQ:BAFN) Is Paying Out A Dividend Of $0.08

Source: Shutterstock

The board of BayFirst Financial Corp. (NASDAQ:BAFN) has announced that it will pay a dividend on the 15th of March, with investors receiving $0.08 per share. This payment means the dividend yield will be 1.7%, 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

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for only 2 years, BayFirst Financial does not have much of a history being a dividend paying company. Diving into the company's earnings report, the payout ratio is set at 28%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

Looking forward, EPS could fall by 1.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

NasdaqCM:BAFN Historic Dividend February 7th 2023

BayFirst Financial Doesn't Have A Long Payment History

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. Since 2021, 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 34% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

BayFirst Financial May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. BayFirst Financial hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments BayFirst Financial has been making. We don't think BayFirst Financial is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for BayFirst Financial (of which 1 is a bit concerning!) you should know about. Is BayFirst Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether BayFirst Financial is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis