It looks like Synovus Financial Corp. (NYSE:SNV) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Synovus Financial’s shares before the 19th of December in order to be eligible for the dividend, which will be paid on the 2nd of January.
The company’s next dividend payment will be US$0.38 per share, and in the last 12 months, the company paid a total of US$1.52 per share. Looking at the last 12 months of distributions, Synovus Financial has a trailing yield of approximately 2.8% on its current stock price of US$54.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Synovus Financial can afford its dividend, and if the dividend could grow.
View our latest analysis for Synovus Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Synovus Financial paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we’re concerned to see Synovus Financial’s earnings per share have dropped 8.3% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Synovus Financial has lifted its dividend by approximately 18% a year on average. That’s interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company’s profits. This can be valuable for shareholders, but it can’t go on forever.
