Synchrony Financial (NYSE:SYF) has announced that it will pay a dividend of $0.25 per share on the 18th of February. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for $Synchrony Financial(SYF-B)$

Synchrony Financial's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 9 years, Synchrony Financial has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Synchrony Financial's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, EPS is forecast to rise by 7.6% over the next 3 years. The future payout ratio could be 14% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Synchrony Financial Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the annual payment back then was $0.52, compared to the most recent full-year payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. Synchrony Financial has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

We Could See Synchrony Financial's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Synchrony Financial has grown earnings per share at 7.7% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Synchrony Financial's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Synchrony Financial (of which 1 is potentially serious!) you should know about. Is Synchrony Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.