The board of BayFirst Financial Corp. (NASDAQ:BAFN) has announced that it will pay a dividend of $0.08 per share on the 15th of September. This payment means the dividend yield will be 2.4%, which is below the average for the industry.

View our latest analysis for BayFirst Financial

BayFirst Financial's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

Having paid out dividends for only 4 years, BayFirst Financial does not have much of a history being a dividend paying company. Based on BayFirst Financial's last earnings report, calculating for its payout ratio equates to 32%, which means that the company covered its last dividend with comfortable room to spare.

Unless the company can turn things around, EPS could fall by 4.9% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

BayFirst Financial 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. The dividend has gone from an annual total of $0.179 in 2020 to the most recent total annual payment of $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. In the last five years, BayFirst Financial's earnings per share has shrunk at approximately 4.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On BayFirst Financial's Dividend

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 identified 4 warning signs for BayFirst Financial (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.