Synchrony Financial (NYSE:SYF) Is Due To Pay A Dividend Of $0.25

Synchrony Financial (NYSE:SYF) will pay a dividend of $0.25 on the 18th of February. This means the annual payment will be 1.4% of the current stock price, which is lower than the industry average.

View our latest analysis for Synchrony Financial

Synchrony Financial's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 9 years, Synchrony Financial has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 13% also shows that Synchrony Financial is able to comfortably pay dividends.

Looking forward, EPS is forecast to rise by 7.6% over the next 3 years. Analysts forecast the future payout ratio could be 14% over the same time horizon, which is a number we think the company can maintain.

Synchrony Financial Is Still Building Its Track Record

Synchrony Financial's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was $0.52, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 7.5% per annum over that time. Synchrony Financial has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

We Could See Synchrony Financial's 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. We are encouraged to see that Synchrony Financial has grown earnings per share at 7.7% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, a consistent dividend is a good thing, and we think that Synchrony Financial has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Synchrony Financial (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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