Stock Analysis

TD SYNNEX (NYSE:SNX) Is Increasing Its Dividend To $0.40

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The board of TD SYNNEX Corporation (NYSE:SNX) has announced that it will be paying its dividend of $0.40 on the 26th of January, an increased payment from last year's comparable dividend. This takes the annual payment to 1.5% of the current stock price, which is about average for the industry.

View our latest analysis for TD SYNNEX

TD SYNNEX's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, TD SYNNEX's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 61.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

NYSE:SNX Historic Dividend January 12th 2024

TD SYNNEX's Dividend Has Lacked Consistency

TD SYNNEX has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was $0.50 in 2015, and the most recent fiscal year payment was $1.60. This means that it has been growing its distributions at 14% per annum over that time. TD SYNNEX has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, TD SYNNEX's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On TD SYNNEX's Dividend

Overall, we always like to see the dividend being raised, but we don't think TD SYNNEX will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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 3 warning signs for TD SYNNEX that you should be aware of before investing. Is TD SYNNEX 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.