Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see TD SYNNEX Corporation (NYSE:SNX) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase TD SYNNEX's shares before the 11th of April in order to be eligible for the dividend, which will be paid on the 26th of April.
The company's next
dividend payment will be US$0.40 per share. Last year, in total, the company
distributed US$1.60 to shareholders. Based on last year's worth of
payments, TD SYNNEX has a trailing yield of 1.4% on the current stock price of
US$117.72. We love seeing companies pay a dividend, but it's also important to
be sure that laying the golden eggs isn't going to kill our golden goose!
That's why we should always check whether the dividend payments appear
sustainable, and if the company is growing.
Dividends are
typically paid from company earnings. If a company pays more in dividends than
it earned in profit, then the dividend could be unsustainable. TD SYNNEX paid
out just 22% of its profit last year, which we think is conservatively low and
leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 7.6% of its free cash flow in the
last year.
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.
Have Earnings And Dividends Been Growing?
Companies that
aren't growing their earnings can still be valuable, but it is even more
important to assess the sustainability of the dividend if it looks like the
company will struggle to grow. If business enters a downturn and the dividend
is cut, the company could see its value fall precipitously. That explains why
we're not overly excited about TD SYNNEX's flat earnings over the past five
years. We'd take that over an earnings decline any day, but in the long run,
the best dividend stocks all grow their earnings per share.
Another key way to
measure a company's dividend prospects is by measuring its historical rate of
dividend growth. In the last 10 years, TD SYNNEX has lifted its dividend by
approximately 12% a year on average.
To Sum It Up
Has TD SYNNEX got
what it takes to maintain its dividend payments? Earnings per share have been
flat, although at least the company is paying out a low and conservative
percentage of both its earnings and cash flow. It's definitely not great to see
earnings falling, but at least there may be some buffer before the dividend
gets cut. In summary, it's hard to get excited about TD SYNNEX from a dividend
perspective.
With that in mind,
a critical part of thorough stock research is being aware of any risks that
stock currently faces. Our analysis shows 2 warning
signs for TD SYNNEX and you should be aware of these before
buying any shares.
https://simplywall.st/stocks/us/tech/nyse-snx/td-synnex/news/td-synnex