Should you buy Synnex Technology International Corporation (TPE: 2347) for its dividend?

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Is Synnex Technology International Corporation (TPE: 2347) a Good Dividend Stock? How can we tell? Companies that pay dividends and grow profits can be very rewarding in the long run. If you are hoping to live off your dividends, it is important to be more strict with your investments than the average bettor. Regular readers know we like to apply the same approach to every dividend-paying stock, and we hope you find our analysis useful.

High yield and a long history of paying dividends is an attractive combination for Synnex Technology International. It would not be surprising to find that many investors buy it for dividends. When buying stocks for their dividends, you should always perform the checks below to see if the dividend looks sustainable.

Click on the interactive chart for our full dividend analysis

TSEC: 2347 Historic dividend April 16, 2021

Payout ratios

Companies (usually) pay dividends on their profits. If a company pays more than it earns, the dividend may need to be reduced. So we need to get a feel for the sustainability of a company’s dividend relative to its after-tax net profit. Looking at the data, we can see that 67% of Synnex Technology International’s profits have been paid out as dividends in the past 12 months. A payout rate above 50% usually implies that a business is maturing, although it is always possible to reinvest in the business or increase the dividend over time.

We also measure dividends paid against a company’s leveraged free cash flow, to see if enough cash has been generated to cover the dividend. Last year, Synnex Technology International paid a dividend while posting negative free cash flow. While there may be an explanation, we believe this behavior is generally not sustainable.

Remember, you can always get an overview of Synnex Technology International’s latest financial situation, by viewing our visualization of its financial health.

Dividend volatility

One of the main risks with dividend income is the potential for a company to struggle financially and reduce its dividend. Not only is your income reduced, but the value of your investment also decreases – unpleasant. For the purposes of this article, we are only looking at the last decade of dividend payments from Synnex Technology International. Its dividend payouts have declined at least once in the past 10 years. In the past 10 years, the first annual payment was NT $ 2.1 in 2011, compared to NT $ 3.3 last year. Dividends per share have increased by approximately 4.6% per year during this period. Dividend growth has not been linear, but the CAGR is a decent approximation of the rate of change over this time period.

We are happy to see that the dividend has increased, but with a limited growth rate and fluctuations in the payments, we don’t think this is an attractive combination.

Potential for dividend growth

With a relatively volatile dividend, it’s even more important to assess whether earnings per share (EPS) is increasing – it’s not worth taking the risk of reducing a dividend, unless you are rewarded with more dividends. important in the future. It is good to see that Synnex Technology International has increased its earnings per share by 21% per year over the past five years. Earnings per share are up sharply, but we wonder if paying more than half of its earnings (leaving less for reinvestment) is an implicit signal that Synnex Technology International’s growth will be slower at the to come up.

Conclusion

When we look at a dividend stock, we need to determine whether the dividend will increase, whether the company is able to sustain it under a wide range of economic circumstances, and whether the dividend payment is sustainable. Synnex Technology International gets a transfer on its dividend payout ratio, but it has paid out substantially all of its cash flow as dividends. It might just be one case, but we’ll be keeping an eye on that. We were also happy to see its earnings increase, but it was concerning that the dividend had been reduced at least once in the past. In short, we find it hard to get excited about Synnex Technology International from a dividend standpoint. It’s not that we think it’s a bad deal; just that there are other companies that perform better on these criteria.

Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. Meanwhile, despite the importance of dividend payments, they aren’t the only factors our readers should be aware of when valuing a business. Concrete example: we have spotted 2 warning signs for Synnex Technology International (1 of which makes us a little uncomfortable!) to know.

Looking for more high yield dividend ideas? Try our curated list of dividend-paying stocks with a yield above 3%.

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