Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that TD SYNNEX (NYSE: SNX) is set to go ex-dividend in just 3 days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for the payment of a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. Therefore, TD SYNNEX investors who purchase the shares on or after October 14 will not receive the dividend, which will be paid on October 29.
The company’s next dividend payment will be US $ 0.20 per share. Last year, in total, the company distributed US $ 0.80 to shareholders. Last year’s total dividend payouts show TD SYNNEX has a 0.8% return on the current share price of $ 105.3. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. TD SYNNEX has a low and conservative payout ratio of only 5.2% of its after-tax income. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. The good thing is that dividends were well covered by free cash flow, with the company paying 6.9% of its cash flow last year.
It is positive to see that the TD SYNNEX dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger one. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
NYSE: SNX Historical Dividend October 10, 2021
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. With that in mind, we are encouraged by the continued growth of TD SYNNEX, with earnings per share up 3.3% on average over the past five years. Growth has been anemic. Still, with over 75% of its profits retained in the business, there is ample room to reinvest in growth or increase the payout ratio – either of which can increase the dividend.
TD SYNNEX has also issued over 5% of its market cap in new stocks over the past year, which we believe may hurt its long-term dividend outlook. Trying to raise the dividend while issuing large amounts of new stock reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a rock upward.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past seven years, TD SYNNEX has increased its dividend by approximately 6.9% per year on average. We are happy to see dividends increasing alongside earnings over multiple years, which may be a sign that the company intends to share the growth with its shareholders.
From a dividend perspective, should investors buy or avoid TD SYNNEX? Earnings per share growth has increased somewhat and TD SYNNEX pays less than half of its earnings and cash flow as dividends. This is interesting for several reasons, as it suggests that management may be reinvesting heavily in the company, but it also helps to increase the dividend over time. It might be nice to see profits rise faster, but TD SYNNEX is careful with its dividend payouts and could still perform reasonably well in the long term. It is a promising combination that should mark this company worthy of further attention.
While it is tempting to invest in TD SYNNEX purely for dividends, you should always be aware of the risks involved. For example – TD SYNNEX has 2 warning signs we think you should be aware.
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