Stock Analysis

SmartFinancial (NASDAQ:SMBK) Has Announced A Dividend Of US$0.06

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NasdaqCM:SMBK
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SmartFinancial, Inc.'s (NASDAQ:SMBK) investors are due to receive a payment of US$0.06 per share on 23rd of August. This payment means the dividend yield will be 0.9%, which is below the average for the industry.

Check out our latest analysis for SmartFinancial

SmartFinancial's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, SmartFinancial was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 5.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 11%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NasdaqCM:SMBK Historic Dividend July 29th 2021

SmartFinancial Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2019, the dividend has gone from US$0.20 to US$0.24. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. SmartFinancial has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that SmartFinancial has grown earnings per share at 31% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

SmartFinancial Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think SmartFinancial might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 SmartFinancial analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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What are the risks and opportunities for SmartFinancial?

SmartFinancial, Inc. operates as the bank holding company for SmartBank that provides various financial services to individuals and corporate customers.

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Rewards

  • Trading at 40% below our estimate of its fair value

  • Earnings are forecast to grow 4.5% per year

  • Earnings grew by 23.7% over the past year

Risks

No risks detected for SMBK from our risks checks.

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