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

The board of BayFirst Financial Corp. (NASDAQ:BAFN) has announced that it will pay a dividend on the 15th of June, with investors receiving $0.08 per share. Including this payment, the dividend yield on the stock will be 2.5%, which is a modest boost for shareholders' returns.

Check out our latest analysis for BayFirst Financial

BayFirst Financial's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

BayFirst Financial is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. While it has a shorter history of paying out dividends, BayFirst Financial's payout ratio of 20% is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Unless the company can turn things around, EPS could fall by 1.8% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 implies that the company grew its distributions at a yearly rate of about 21% over that duration. 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.

BayFirst Financial May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. BayFirst Financial hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On BayFirst Financial's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, BayFirst Financial has 3 warning signs (and 1 which is significant) we think you should know about. 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.