SmartFinancial (NASDAQ:SMBK) Is Due To Pay A Dividend Of $0.08

SmartFinancial, Inc. (NASDAQ:SMBK) has announced that it will pay a dividend of $0.08 per share on the 29th of May. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.

View our latest analysis for SmartFinancial

SmartFinancial's Earnings Will Easily Cover The Distributions

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

Having paid out dividends for only 3 years, SmartFinancial does not have much of a history being a dividend paying company. Based on its last earnings report however, the payout ratio is at a comfortable 11%, meaning that SmartFinancial may be able to sustain this dividend for future years if it continues on this earnings trend.

Looking forward, earnings per share is forecast to fall by 4.3% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 15%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

SmartFinancial Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from $0.20 total annually to $0.32. This implies that the company grew its distributions at a yearly rate of about 17% 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that SmartFinancial has been growing its earnings per share at 31% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

SmartFinancial Looks Like A Great Dividend Stock

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. 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. 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 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.