BayFirst Financial Corp. (NASDAQ:BAFN) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase BayFirst Financial's shares before the 30th of August in order to receive the dividend, which the company will pay on the 15th of September.

The company's next dividend payment will be US$0.08 per share. Last year, in total, the company distributed US$0.32 to shareholders. Calculating the last year's worth of payments shows that BayFirst Financial has a trailing yield of 2.3% on the current share price of US$14.07. If you buy this business for its dividend, you should have an idea of whether BayFirst Financial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately BayFirst Financial's payout ratio is modest, at just 32% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit BayFirst Financial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see BayFirst Financial's earnings per share have been shrinking at 4.9% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last four years, BayFirst Financial has lifted its dividend by approximately 16% a year on average.

The Bottom Line

Is BayFirst Financial an attractive dividend stock, or better left on the shelf? BayFirst Financial's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We're unconvinced on the company's merits, and think there might be better opportunities out there.

If you want to look further into BayFirst Financial, it's worth knowing the risks this business faces. For example, we've found 4 warning signs for BayFirst Financial (1 is significant!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.