Stock Analysis

SmartFinancial (NASDAQ:SMBK) Has Re-Affirmed Its 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 29th of November. This payment means the dividend yield will be 0.9%, which is below the average for the industry.

View our latest analysis for SmartFinancial

SmartFinancial's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. 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 9.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 12%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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NasdaqCM:SMBK Historic Dividend November 4th 2021

SmartFinancial 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. The first annual payment during the last 2 years was US$0.20 in 2019, and the most recent fiscal year payment was US$0.24. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider SmartFinancial to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. SmartFinancial has seen EPS rising for the last five years, at 23% per annum. 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.

The company has also been raising capital by issuing stock equal to 10% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like SmartFinancial's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for SmartFinancial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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