Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, Guaranty Federal Bancshares Inc ( NASDAQ:GFED ) has returned an average of 1.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Guaranty Federal Bancshares in more detail. Check out our latest analysis for Guaranty Federal Bancshares
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does Guaranty Federal Bancshares fit our criteria?
The company currently pays out 35.59% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 21.23%, leading to a dividend yield of 1.92%. However, EPS should increase to $1.79, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Guaranty Federal Bancshares fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Relative to peers, Guaranty Federal Bancshares has a yield of 2.04%, which is on the low-side for Mortgage stocks.
Taking all the above into account, Guaranty Federal Bancshares is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three relevant factors you should further research:
- Future Outlook : What are well-informed industry analysts predicting for GFED’s future growth? Take a look at our free research report of analyst consensus for GFED’s outlook.
- Valuation : What is GFED worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GFED is currently mispriced by the market.
- Dividend Rockstars : Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here .
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.