The board of Guaranty Bancshares, Inc. (NYSE:GNTY) has announced that it will pay a dividend of $0.24 per share on the 9th of October. This payment means that the dividend yield will be 2.8%, which is around the industry average.

Check out our latest analysis for Guaranty Bancshares

Guaranty Bancshares' Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Guaranty Bancshares has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 41%shows that Guaranty Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to rise by 5.2% over the next year. If the dividend continues on this path, the future payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Guaranty Bancshares Is Still Building Its Track Record

It is great to see that Guaranty Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.473, compared to the most recent full-year payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Guaranty Bancshares has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See Guaranty Bancshares' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Guaranty Bancshares has seen EPS rising for the last five years, at 5.5% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Guaranty Bancshares' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Guaranty Bancshares that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.