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Synovus Financial Corp. (NYSE:SNV) will increase its dividend from last year's comparable payment on the 1st of April to $0.39. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.
See our latest analysis for Synovus Financial
Synovus Financial's Earnings Will Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time.
Synovus Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 50%, which means that Synovus Financial would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 94.2% over the next 3 years. The future payout ratio could be 28% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Synovus Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.28 in 2015, and the most recent fiscal year payment was $1.56. This means that it has been growing its distributions at 19% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Synovus Financial May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. It's not great to see that Synovus Financial's earnings per share has fallen at approximately 2.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On Synovus Financial's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.