It looks like Synchrony Financial (NYSE:SYF) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Synchrony Financial investors that purchase the stock on or after the 4th of November will not receive the dividend, which will be paid on the 15th of November.
The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that Synchrony Financial has a trailing yield of 1.8% on the current share price of US$55.75. If you buy this business for its dividend, you should have an idea of whether Synchrony Financial's dividend is reliable and sustainable. So we need to investigate whether Synchrony Financial can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Synchrony Financial has a low and conservative payout ratio of just 13% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Synchrony Financial's earnings per share have been growing at 16% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Synchrony Financial has delivered 8.5% dividend growth per year on average over the past eight years. 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.
Final Takeaway
Is Synchrony Financial an attractive dividend stock, or better left on the shelf? Companies like Synchrony Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Synchrony Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Synchrony Financial has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Synchrony Financial has 3 warning signs (and 1 which is concerning) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
