On the 26 October 2018, SYNNEX Corporation (NYSE:SNX) will be paying shareholders an upcoming dividend amount of US$0.35 per share. However, investors must have bought the company’s stock before 11 October 2018 in order to qualify for the payment. That means you have only 4 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at SYNNEX’s most recent financial data to examine its dividend characteristics in more detail.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does SYNNEX pass our checks?
SYNNEX has a trailing twelve-month payout ratio of 19%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect SNX’s payout to fall to 12% of its earnings, which leads to a dividend yield of around 1.6%. However, EPS should increase to $9, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view SYNNEX as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, SYNNEX generates a yield of 1.6%, which is high for Electronic stocks but still below the market’s top dividend payers.
If you are building an income portfolio, then SYNNEX is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SNX’s future growth? Take a look at our free research report of analyst consensus for SNX’s outlook.
- Valuation: What is SNX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SNX is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.