Don’t Buy Synovus Financial Corp. (NYSE:SNV) For Its Next Dividend Without Doing These Checks
Dividend investing is a strategy that many investors love for its potential to provide regular income from their stock holdings. Among the companies on their radar, Synovus Financial Corp. (NYSE:SNV) appears notable because of its imminent ex-dividend date. Before the excitement takes over, it’s crucial for investors to perform due diligence to ensure their investment will not lead to disappointment.
Synovus Financial is on the cusp of its ex-dividend date, set just four days ahead. The ex-dividend date is crucial as it determines the shareholders eligible for the upcoming dividend payment. For Synovus Financial, this date precedes the record date — the day on which the company finalizes its list of shareholders eligible for the dividend. Worth noting is that stock purchases around this time need careful consideration; any shares bought on or after the 20th of June will miss out on the dividend payment scheduled for the 1st of July.
Investors are looking at a dividend payment of US$0.38 per share. Over the last year, the total dividends paid amounted to US$1.52 per share. With the stock currently priced at US$36.58, Synovus Financial’s trailing dividend yield sits at roughly 4.2%. While the prospect of earning dividends is appealing, it’s imperative for investors to assess whether the company can sustain these payments without financial strain.
Understanding Dividend Sustainability
Dividend sustainability can often be gauged by examining payout ratios, which compare the dividend paid to the company’s earnings. A payout ratio over 50% is particularly eye-catching because it suggests more than half of earnings are being distributed as dividends. For Synovus Financial, the payout ratio stands at 52%, a figure that necessitates further investigation into its dividend safety.
A resilient dividend typically comes from a company with low payout ratios. This suggests the dividend is well-covered by earnings and less likely to be cut in the future.
The Earnings Perspective
A closer look at Synovus Financial’s earnings reveals a 3.4% yearly decline over the past five years. This raises some red flags about the company’s financial health and its ability to sustain dividend payments. Declining earnings and a significant dividend payout could spell trouble if the trend continues.
Dividend Growth and Future Prospects
Despite these concerns, Synovus Financial has demonstrated a commitment to growing its dividend, having increased it by approximately 18% annually over the past decade. This growth is commendable but raises questions when paired with declining earnings. Paying out a growing dividend amidst falling profits can only go so far before adjustments are necessary.
Final Thoughts
The upcoming dividend for Synovus Financial might tempt investors, but the backdrop of declining earnings and a significant payout ratio warrants caution. Investing in dividends requires confidence in a company’s ability to sustain payments, and the current signs for Synovus Financial provoke skepticism.
While the allure of dividends remains, investors should balance yield chasing with thorough analysis of a company’s financial health. For those still considering Synovus Financial, it may also be wise to explore other opportunities and heed any warning signs that could impact your investment.
In pursuit of the best dividend stocks, further research and vigilance are key. Remember, a strong dividend payer today must show prospects of continuing this trend into the future, underpinned by robust financial performance.
