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TD SYNNEX (NYSE:SNX) is about to trade ex-dividend in the next three 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase TD SYNNEX's shares before the 14th of October in order to be eligible for the dividend, which will be paid on the 29th of October.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Last year's total dividend payments show that TD SYNNEX has a trailing yield of 0.8% on the current share price of $105.3. If you buy this business for its dividend, you should have an idea of whether TD SYNNEX's dividend is reliable and sustainable. So we need to investigate whether TD SYNNEX can afford its dividend, and if the dividend could grow.
View our latest analysis for TD SYNNEX
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. TD SYNNEX has a low and conservative payout ratio of just 5.2% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 6.9% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that TD SYNNEX's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at TD SYNNEX, with earnings per share up 3.3% on average over the last five years. TD SYNNEX is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.