Updated 3/26
Smith & Wesson is one of the most iconic names in American manufacturing. With a legacy that dates back to the 1800s, it’s a brand steeped in history. Today, it operates in a far more modern and competitive landscape, but the company’s mission remains focused: delivering firearms to consumers, law enforcement, and military clients across the globe.
For dividend investors, the company presents an interesting case. It’s a small-cap stock, trading recently at $9.48 per share, with a market value of just over $417 million. But what makes SWBI stand out is not just the brand, it’s the dividend yield—now north of 5%—that’s catching the eye of income-seeking investors.
Recent Events
Smith & Wesson’s stock has taken a hit over the last 12 months, dropping more than 45% while the broader S&P 500 climbed over 8%. This isn’t just market sentiment—it reflects a sharp drop in both earnings and revenue. For the most recent quarter ending January 31, 2025, revenue shrank 15.7% year over year, and earnings growth plummeted by nearly 79%.
At the same time, the company’s market cap slid from over $770 million in early 2024 to $417 million by March 2025. That’s a dramatic drop in value, which has pushed the stock to the lower end of its 52-week range, now hovering near $9.17, just above its recent low.
Still, despite the struggles, SWBI continues to pay its dividend. The next payout is scheduled for April 3, 2025, showing that management is standing behind its shareholder return program even during more turbulent periods.
Key Dividend Metrics
📈 Forward Yield: 5.49%
💸 Payout Ratio: 78.46%
📅 Next Dividend Date: April 3, 2025
📆 Ex-Dividend Date: March 20, 2025
📉 Trailing Yield: 5.35%
💰 Annual Dividend Rate (Forward): $0.52
⚖️ Dividend Coverage (EPS-Based): Approximately 1.27x
This kind of yield isn’t easy to find in today’s market, but it’s not without its caveats. The elevated payout ratio suggests the company is walking a fine line between keeping shareholders happy and managing its declining profitability.
Dividend Overview
On paper, the dividend looks generous. A 5.5% forward yield on a small-cap industrial name is compelling. For income investors, this is the kind of return that adds real value to a portfolio—especially in a market environment where reliable income streams are scarce.
But there’s an underlying tension. With earnings under pressure and a payout ratio approaching 80%, there’s little margin for error. The dividend has been stable for now, but future increases—or even maintenance—will hinge on stabilizing revenue and earnings in the quarters ahead.
Dividend Growth and Safety
SWBI doesn’t have a long history of steady dividend growth, so this isn’t one of those stocks you buy expecting consistent annual hikes. That said, the company hasn’t pulled back on the payout despite revenue and margin pressure, which speaks to a certain level of commitment.
However, safety is the key issue. With trailing 12-month earnings at $0.65 per share and a dividend commitment of $0.52 annually, there’s not a lot of breathing room. Any further deterioration in earnings could put the dividend at risk. The lack of strong free cash flow—currently negative on both an operating and levered basis—only reinforces that risk.
Right now, the company seems to be prioritizing shareholder returns, but unless fundamentals improve, the sustainability of the payout will remain an open question.
Chart Analysis
Downward Momentum and Moving Averages
The chart for Smith & Wesson Brands (SWBI) paints a clear picture of sustained weakness. The 50-day moving average (orange line) has been trending lower since mid-September, consistently sitting below the 200-day moving average (blue line). This alignment reflects a classic bearish setup, with no indication yet of a reversal. The 200-day average is slowly declining, which confirms the long-term downtrend remains intact. Each attempt to push higher has failed to break through either moving average, reinforcing the resistance levels they present.
Volume Patterns and Investor Sentiment
Volume has been mostly muted throughout the past year, except for a handful of spikes. Notably, large red volume bars emerged during steep drops—particularly around December and again in early March—suggesting institutional or panic selling. These heavier down-volume days outpaced green volume, indicating a consistent lack of buying conviction. Since those capitulations, volume has tapered off, hinting that the market is waiting for new information or a clear catalyst before committing in either direction.
RSI Indicator and Oversold Signals
Looking at the Relative Strength Index (RSI) at the bottom of the chart, SWBI has spent a good deal of time near or below the 30 level, especially during sharp selloffs. This technically marks oversold territory, though bounces from these levels have been weak and short-lived. The RSI has climbed slightly since the March low, but remains subdued, hovering in the 30 to 40 range—still far from signaling bullish momentum. The lack of strength in the RSI aligns with the price action, reinforcing the idea that the stock hasn’t built any sustainable buying pressure yet.
Price Action and Candle Behavior
Over the last five trading days, the candles are tight and relatively small in body, reflecting indecision. There’s a notable presence of long lower wicks, especially on the March 21 and March 25 candles. That suggests buyers are stepping in at the lower end of the range, but they’re not strong enough to push prices meaningfully higher. These subtle intraday recoveries are worth watching, as they might indicate short-term support forming near the $9.50 level. Still, the absence of large-bodied bullish candles signals hesitation from both sides.
Support and Resistance
The area around $9.17, the 52-week low, has acted as a support floor multiple times, including recent sessions in March. It’s held, but just barely. Meanwhile, the former support near the $10.40 level, once a consolidation zone earlier this year, has now flipped into resistance. This level aligns with the falling 50-day moving average, compounding the challenge for bulls. The price would need to decisively clear both this zone and the moving average to suggest any real change in sentiment.
Analyst Ratings
📈 Smith & Wesson Brands, Inc. (SWBI) has recently seen a range of analyst opinions, with some calling for a potential rebound while others are taking a more cautious approach.
🟢 In January 2025, one firm upgraded SWBI from a hold to a strong buy and set a price target of $13. The move was reportedly based on expected improvements in operational efficiency and a belief that the company could benefit from upcoming shifts in consumer demand within the firearms space.
🔻 On the other hand, a downgrade came through in late December 2024, when another analyst lowered their rating from strong buy to hold. Their revised price target dropped from $18 to $13, citing weaker-than-expected earnings performance and ongoing headwinds related to slowing industry sales.
🎯 As of the most recent updates, the average consensus price target for SWBI sits at approximately $13.83. Targets range from a low of $12.50 to a high of $16.00, showing a moderate level of disagreement among analysts but still suggesting some upside from current levels.
💬 The mixed signals from the analyst community reflect the broader uncertainty surrounding both the company’s near-term growth prospects and overall demand trends in the sector. While some see room for recovery, others are waiting to see a stronger turnaround in financial performance before becoming more optimistic.
Earnings Report Summary
Sales Slipped in a Tough Quarter
Smith & Wesson’s latest earnings update shows the company ran into a rough patch in the third quarter of fiscal 2025. Net sales came in at around $115.9 million, which is down about 16 percent from the same period last year. That slowdown wasn’t totally unexpected, but it still stings. The company has been feeling the pressure from softer consumer demand, and that’s clearly showing up in the numbers.
Margins also took a bit of a hit, with gross margin dropping to 24.1 percent compared to nearly 29 percent a year ago. That’s a noticeable dip and speaks to the rising cost pressures or maybe just tougher pricing power in a more competitive market. Operating income was also lower, down to $2.2 million from $10.9 million last year. When all was said and done, net income landed at $1.7 million, or about 4 cents per diluted share, which is a steep drop from the 17 cents per share it posted during the same quarter a year ago.
Bright Spot in New Products
One of the more encouraging notes in the report was that new product launches are doing some heavy lifting. These recently introduced offerings made up over 41 percent of total sales during the quarter. That’s a solid sign that innovation is connecting with customers, even if overall demand is down. It shows that the company is still able to bring fresh, relevant products to market—and that could be a big part of any turnaround story moving forward.
The entire firearms industry is in a bit of a reset mode right now. Demand is cooling off from the highs of recent years, and companies like Smith & Wesson are trying to find their footing. This quarter’s results are a reflection of that environment. The company will likely have to keep adjusting its strategy and cutting costs where it can, while leaning more heavily into what’s working—namely, its newer product lines.
Despite the rocky quarter, the company isn’t backing away from rewarding shareholders. It declared a quarterly dividend of 13 cents per share, payable in early April. That consistency is something investors will likely appreciate, especially in an environment where a lot of small caps are pulling back on capital returns.
Looking Ahead
Smith & Wesson is guiding for full-year revenue to come in 5 to 10 percent lower than last year. That tells us the headwinds are expected to stick around for a bit longer. But if the company can keep finding success with its newer products and manage its costs carefully, it might be able to ride this out and emerge stronger on the other side.
Financial Health and Stability
The financial picture is mixed. The balance sheet shows a decent amount of liquidity, with $26.7 million in cash and a very strong current ratio of 4.67, which means the company can cover its short-term obligations several times over.
Total debt sits at $145 million, and with a debt-to-equity ratio under 40%, the leverage isn’t out of control. That said, it’s clear the company isn’t generating the same level of cash flow it once did. Operating cash flow over the trailing twelve months came in at -$4.32 million, and levered free cash flow was negative $21.73 million. That’s a far cry from what you’d want to see in a business paying out more than three-quarters of its earnings in dividends.
From a profitability standpoint, the margins are tight. Operating margin is just 1.89%, and net margin sits at 6.04%. Return on assets and equity are modest at 3.59% and 8.05%, respectively. These aren’t weak numbers, but they’re definitely not strong enough to signal a robust buffer against further economic or industry-specific headwinds.
Valuation and Stock Performance
At its current price, SWBI trades at a trailing P/E of 14.58. That’s not expensive, but it’s also not trading at a distressed valuation. The price-to-book ratio is 1.15, which suggests the market sees some value beyond just the company’s assets. Compared to its past levels, where P/B climbed over 2.0, this is a significant markdown.
Enterprise value to EBITDA stands at 7.31—again, not unreasonable, but not exactly cheap either given the declining earnings and revenue backdrop.
Looking at the chart, the stock has been trending downwards for most of the past year, with a 200-day moving average of $12.75 and a 50-day average of $10.39. The current price of $9.48 puts it well below both, indicating continued weakness.
It’s worth noting that the stock isn’t particularly volatile, with a beta of 1.02. That means it moves pretty closely in line with the broader market, which is rare for a company that’s seen such a sharp share price decline over the last year.
Risks and Considerations
There’s a lot to think about here for potential investors. First, the steep drop in earnings—nearly 80% year-over-year—is a serious red flag. Even with solid revenue of $493 million, profitability has been squeezed hard.
Then there’s the broader environment. Firearms demand can be highly cyclical and politically sensitive, which introduces a layer of unpredictability. Changes in regulation, sentiment, or economic conditions could quickly shift demand patterns, which would affect revenue and margins.
Cash flow is another concern. Negative free cash flow is never a great sign, especially when a company is paying out such a large portion of earnings as dividends. While the balance sheet isn’t over-leveraged, there’s only so long a company can sustain payouts from reserves without replenishing them through earnings.
Insider and institutional ownership also tell a story. Insiders hold just 1.3% of the stock, while institutions control nearly 56%. This indicates there’s limited internal alignment with long-term shareholder outcomes, which may concern some investors.
Final Thoughts
Smith & Wesson Brands, Inc. is a complicated story for dividend-focused investors. On the surface, the yield is highly attractive, and the company has shown a willingness to keep paying shareholders even during challenging times.
But dig a little deeper and the cracks begin to show. Declining earnings, negative cash flow, and industry-specific pressures create a tough backdrop. The dividend remains intact for now, but unless there’s a turnaround in the company’s fundamentals, the sustainability of that payout becomes a pressing question.
That said, this is a company with a long history, a recognizable brand, and a management team that appears committed to supporting its shareholders. Whether that can hold up in the face of operational and market challenges remains to be seen. For now, SWBI offers income—but it comes with a healthy dose of risk.