Synchrony Financial's Dividend Analysis

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Insights into Synchrony Financial's Dividend Performance and Sustainability

Synchrony Financial (NYSE:SYF) recently announced a dividend of $0.25 per share, payable on 2023-11-09, with the ex-dividend date set for 2023-10-31. As investors anticipate this upcoming payment, it's crucial to examine the company's dividend history, yield, and growth rates. Using data from GuruFocus, let's delve into Synchrony Financial's dividend performance and assess its sustainability.

What Does Synchrony Financial Do?

Synchrony Financial, originally a spinoff of GE Capital's retail financing business, is the largest provider of private-label credit cards in the United States by both outstanding receivables and purchasing volume. Synchrony partners with other firms to market its credit products in their physical stores as well as on their websites and mobile applications. Synchrony operates through three segments: retail card, payment solutions, and CareCredit.

Synchrony Financial's Dividend Analysis
Synchrony Financial's Dividend Analysis

A Glimpse at Synchrony Financial's Dividend History

Synchrony Financial has maintained a consistent dividend payment record since 2016, with dividends currently distributed on a quarterly basis. The chart below shows the annual Dividends Per Share for tracking historical trends.

Synchrony Financial's Dividend Analysis
Synchrony Financial's Dividend Analysis

Breaking Down Synchrony Financial's Dividend Yield and Growth

As of today, Synchrony Financial has a 12-month trailing dividend yield of 3.35% and a 12-month forward dividend yield of 3.42%. This suggests an expectation of increased dividend payments over the next 12 months.

Over the past three years, Synchrony Financial's annual dividend growth rate was 1.50%. Extended to a five-year horizon, this rate increased to 8.90% per year. Based on Synchrony Financial's dividend yield and five-year growth rate, the 5-year yield on cost of Synchrony Financial stock as of today is approximately 5.13%.

Synchrony Financial's Dividend Analysis
Synchrony Financial's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Synchrony Financial's dividend payout ratio is 0.17.

Synchrony Financial's profitability rank is 6 out of 10 as of 2023-09-30, suggesting fair profitability. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

Synchrony Financial's growth rank of 6 out of 10 suggests a fair growth outlook. The company's revenue per share and 3-year revenue growth rate indicates a strong revenue model; the revenue has increased by approximately 6.90% per year on average, outperforming approximately 57.23% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Synchrony Financial's earnings increased by approximately 3.40% per year on average, outperforming approximately 40.3% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 18.00% outperforms approximately 69.4% of global competitors.

Conclusion

Considering Synchrony Financial's consistent dividend payments, solid dividend growth rate, sustainable payout ratio, and robust growth metrics, it appears to be a reliable dividend stock. However, investors should continue to monitor these factors closely to ensure the company maintains its dividend performance and sustainability. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.

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