Last update on 2024-06-27

Synchrony Financial (SYF) - Dividend Analysis (Final Score: 7/8)

In-depth dividend analysis of Synchrony Financial (SYF) with a final score of 7/8, evaluating performance and stability over 8 criteria.

Short Analysis - Dividend Score: 7

We're running Synchrony Financial (SYF) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Synchrony Financial scored a 7 out of 8 on an extensive analysis of its dividend stability, emphasizing a solid performance. Key findings include a competitive dividend yield above the industry average, a low payout ratio favoring financial stability, and positive cash flow coverage for dividends. However, the company hasn't paid dividends for over 25 years, a factor crucial for some long-term investors.

Insights for Value Investors Seeking Stable Income

Given Synchrony Financial's strong dividend yield, low payout ratio, and robust cash flow coverage, the stock appears to be a solid choice for income-focused investors. Despite its relatively short history of paying dividends, its stability and growth trends in payouts are promising. Investors interested in reliable dividend income might consider adding SYF to their portfolio, but they should be aware of its shorter dividend-paying record.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

This criterion examines the dividend yield of Synchrony Financial and compares it with the industry average. The dividend yield illustrates the percentage return on the stock based on dividend payments. A higher dividend yield can be attractive for income-focused investors.

Synchrony Financial (SYF) has demonstrated a dividend yield of 2.5137%, surpassing the industry average of 2.43%. This is indicative of a relatively strong return for investors looking for dividends. Analyzing the historical data, it's noteworthy that SYF started paying dividends in 2016 and has seen a generally upward trend in its dividend yield, peaking at 3.0691% in 2018. In more recent years, SYF's dividend yield has remained competitive compared to the industry average, indicating a robust dividend policy. Additionally, the company's stock price, which closed at $38.19 in 2023, suggests that the dividend yield remains attractive despite volatility. Overall, a higher-than-average dividend yield is a positive indicator for income investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is higher than 5% in the last 20 years?

Analyzing the historical dividend growth rate provides insight into a company's ability to increase shareholder value over time. This measure is crucial for assessing long-term potential of the company's dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

A payout ratio measures the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. It's crucial as it indicates financial stability.

The average payout ratio for Synchrony Financial (SYF) over the provided years (2011-2023) is 11.46%, which is significantly lower than the threshold of 65%. This very low payout ratio suggests that the company is retaining a majority of its earnings rather than distributing them as dividends. Historically, this trend can be a good sign, indicating that the company might be reinvesting its profits for growth or building reserves. Since the payout ratio remained well under 65%, SYF demonstrates a conservative approach in dividend distributions, which bodes well for its financial stability.

Dividends Well Covered by Earnings?

What does it mean when dividends are well covered by earnings and why is it important to consider that when evaluating a stock?

Dividends being well covered by earnings indicates the company's capacity to continue paying and potentially increasing dividends without compromising financial health. This is often assessed by comparing the `Dividend per Share` (DPS) against the `Earnings per Share` (EPS). If the Ratio of DPS to EPS is low, it signifies that EPS comfortably covers the dividends, enabling sustainable payouts. For Synchrony Financial (SYF), analyzing the figures provides moderate assurance about dividend safety. Since 2016, the cover ratio ranges engagingly between 0.096 and 0.374. While 2020 reflected an anomaly due to a lower EPS reflecting pandemic effects, remaining years show an overall sound and cautiously growing capacity indicating SYF’s commitment to maintaining shareholder value through dividends. Definitely commendable though slightly varied per competitive financial sector standards.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refer to whether the company's free cash flow sufficiently covers the dividend payouts.

Analyzing the free cash flow and dividend payout amount from 2011 to 2023, it's clear that Synchrony Financial's dividends are increasingly well covered by its free cash flow. In earlier years, until 2013, dividends had no relative coverage as there were no dividend distributions. From 2014 onwards, despite increases in dividend payouts, the coverage ratio likewise improved significantly. This trend indicates that the company's ability to sustain and potentially grow its dividend payouts is robust. For instance, in 2023, the coverage ratio stands at 0.0521, showcasing a decrease from prior years but still maintaining a healthy level. However, the overall trend from 2011 to 2023 is positive, reflecting strong financial health and prudent cash flow management.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Synchrony Financial (SYF) and why it is important to consider

Stabilität bei Dividendenzahlungen, wobei die Dividende pro Aktie in den letzten zwei Jahrzehnten nicht um mehr als 20 % gesunken ist, hat für einkommensorientierte Anleger höchste Priorität.

Dividends Paid for Over 25 Years?

The years a company has paid dividends is important as it shows commitment to returning value to shareholders and stability.

Based on the recent data provided, Synchrony Financial has been paying dividends only since 2016. The dividend payments have been gradually increasing, starting from $0.26 per share in 2016 to $0.96 per share in 2023. This trend is good as it illustrates growing shareholder returns and increasing company confidence in its financial stability. However, since the company hasn’t been paying dividends for over 25 years, it doesn’t fully meet the criterion, making it less appealing to investors looking for long-term dividend-paying stocks.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Synchrony Financial (SYF) and why it is important to consider

The criterion of reliable stock repurchases over the past 20 years is pivotal as it demonstrates a company's commitment to returning value to shareholders. Companies often repurchase shares to reduce the number of shares outstanding, thereby increasing the value of remaining shares and signaling financial strength and confidence in future earnings potential. Less outstanding shares indicate potentially higher earnings per share (EPS) and improved stock performance.