Synchrony Financial's (NYSE:SYF) Dividend Will Be US$0.22

Synchrony Financial (NYSE:SYF) has announced that it will pay a dividend of US$0.22 per share on the 12th of May. This means the dividend yield will be fairly typical at 2.3%.

See our latest analysis for Synchrony Financial

Synchrony Financial's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Synchrony Financial was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 22.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Synchrony Financial Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.52 in 2016 to the most recent annual payment of US$0.88. This means that it has been growing its distributions at 9.2% per annum over that time. Synchrony Financial has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Synchrony Financial has seen EPS rising for the last five years, at 25% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Synchrony Financial Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Synchrony Financial might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Synchrony Financial (1 doesn't sit too well with us!) 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.