Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Guaranty Bancshares, Inc. (NASDAQ:GNTY) is about to go ex-dividend in just 2 days. Ex-dividend means that investors that purchase the stock on or after the 25th of September will not receive this dividend, which will be paid on the 9th of October.
Guaranty Bancshares's next dividend payment will be US$0.2 per share. Last year, in total, the company distributed US$0.7 to shareholders. Looking at the last 12 months of distributions, Guaranty Bancshares has a trailing yield of approximately 2.3% on its current stock price of $31.89. If you buy this business for its dividend, you should have an idea of whether Guaranty Bancshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Guaranty Bancshares paying out a modest 34% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 not enthused to see that Guaranty Bancshares's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Guaranty Bancshares has delivered 18% dividend growth per year on average over the past two years.
Has Guaranty Bancshares got what it takes to maintain its dividend payments? Guaranty Bancshares's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. We're unconvinced on the company's merits, and think there might be better opportunities out there.
Ever wonder what the future holds for Guaranty Bancshares? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.