Synchrony Financial (NYSE:SYF) Stock Goes Ex-Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Synchrony Financial (NYSE:SYF) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 30th of October, you won't be eligible to receive this dividend, when it is paid on the 12th of November.

Synchrony Financial's upcoming dividend is US$0.22 a share, following on from the last 12 months, when the company distributed a total of US$0.88 per share to shareholders. Last year's total dividend payments show that Synchrony Financial has a trailing yield of 3.2% on the current share price of $27.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Synchrony Financial

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Synchrony Financial paid out a comfortable 39% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Synchrony Financial's earnings are down 4.3% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Synchrony Financial has delivered an average of 14% per year annual increase in its dividend, based on the past four years of dividend payments.

Final Takeaway

Has Synchrony Financial got what it takes to maintain its dividend payments? Synchrony Financial's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

However if you're still interested in Synchrony Financial as a potential investment, you should definitely consider some of the risks involved with Synchrony Financial. Case in point: We've spotted 2 warning signs for Synchrony Financial you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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