Readers hoping to buy Guaranty Federal Bancshares, Inc. (NASDAQ:GFED) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 7th of October in order to receive the dividend, which the company will pay on the 18th of October.
Guaranty Federal Bancshares's next dividend payment will be US$0.1 per share, and in the last 12 months, the company paid a total of US$0.5 per share. Based on the last year's worth of payments, Guaranty Federal Bancshares stock has a trailing yield of around 2.1% on the current share price of $24.25. If you buy this business for its dividend, you should have an idea of whether Guaranty Federal Bancshares's dividend is reliable and sustainable. As a result, readers should always check whether Guaranty Federal Bancshares has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Guaranty Federal Bancshares paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Guaranty Federal Bancshares, with earnings per share up 8.6% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past five years, Guaranty Federal Bancshares has increased its dividend at approximately 21% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Guaranty Federal Bancshares got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Guaranty Federal Bancshares more closely.
Want to learn more about Guaranty Federal Bancshares? Here's a visualisation of its historical rate of revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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