Synchrony Financial's (NYSE:SYF) Dividend Will Be $0.25

The board of Synchrony Financial (NYSE:SYF) has announced that it will pay a dividend on the 15th of November, with investors receiving $0.25 per share. This payment means that the dividend yield will be 1.8%, which is around the industry average.

View our latest analysis for Synchrony Financial

Synchrony Financial's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Synchrony Financial has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Using data from its latest earnings report, Synchrony Financial's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to fall by 13.2%. Fortunately, analysts forecast the future payout ratio to be 18% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Synchrony Financial Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was $0.52 in 2016, and the most recent fiscal year payment was $1.00. This implies that the company grew its distributions at a yearly rate of about 8.5% over that duration. 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.

Synchrony Financial Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Synchrony Financial has impressed us by growing EPS at 7.7% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Synchrony Financial's Dividend

Overall, we think Synchrony Financial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Synchrony Financial has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Synchrony Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.