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The board of TD SYNNEX Corporation (NYSE:SNX) has announced that it will be paying its dividend of $0.35 on the 28th of April, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.
See our latest analysis for TD SYNNEX
TD SYNNEX's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, TD SYNNEX's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 95.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 9.1%, which is in the range that makes us comfortable with the sustainability of the dividend.
TD SYNNEX's Dividend Has Lacked Consistency
Looking back, TD SYNNEX's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was $0.50 in 2015, and the most recent fiscal year payment was $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth May Be Hard To Achieve
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 2.0% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, TD SYNNEX could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On TD SYNNEX's Dividend
In summary, while it's always good to see the dividend being raised, we don't think TD SYNNEX's payments are rock solid. While TD SYNNEX is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for TD SYNNEX (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.