While the dividend has grown steadily from $0.26 per share in 2016 to $1.05 currently, the real power comes from the buyback engine. In 2018 and 2022, Synchrony repurchased the equivalent of 13.63% and 24.32% of its market cap, respectively, during periods of market dislocation. This isn’t financial engineering, it’s tactical capital deployment. The company has reduced its share count by over 30% since 2016, all while maintaining a conservative payout ratio that rarely exceeds 20%. That leaves room for continued returns without straining regulatory capital levels.

Synchrony Financial isn’t just profitable, it’s aggressive in how it shares that profitability with investors. Over the past eight years, the company has delivered a rare combination of consistent dividends and opportunistic buybacks, creating a total shareholder yield that regularly exceeds 10%, and spiked as high as 27% in 2022.

Unlike buy-now-pay-later startups chasing volume with razor-thin margins, Synchrony operates a durable, interest-driven model backed by decades of data. Its return on equity regularly exceeds 18%, thanks in part to that risk-adjusted, merchant-integrated underwriting engine. It’s not sexy, but it’s sticky, and increasingly rare in a financial sector overrun by commoditized loan books.

Unlike traditional banks that depend on consumer deposits and broad lending portfolios, Synchrony operates in a tightly focused lane: private-label credit and co-branded cards. It partners with retailers like Amazon, Lowe’s, Sam’s Club, and CareCredit for healthcare financing, embedding itself directly at the point of sale. This embedded finance model is more defensible than it looks. Synchrony doesn’t just lend; it owns the relationship with both the merchant and the customer. Its partners get tailored credit programs, and Synchrony earns high-yield, interest-bearing balances with direct underwriting control.

Synchrony Financial isn’t the kind of stock that trends on Reddit or commands CNBC airtime. It’s a spinoff bank that underwrites store credit cards for companies like Amazon and Lowe’s, hardly the most glamorous corner of the market. But quietly, Synchrony is becoming a capital return powerhouse. With an 11% shareholder yield, expanding margins, and a valuation under 7x forward earnings, its offering is more than the most high-growth names at a fraction of the risk, in a market still obsessed with momentum and narratives, Synchrony is playing a different game: generating cash, returning it, and waiting for the market to notice. And when it does, the rerating could be substantial.

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In a market where many banks are dialing back repurchases to preserve liquidity, Synchrony is taking the opposite approach, leaning into its strength and rewarding shareholders when it matters most.

Stock Valuation

At first glance, Synchrony Financial trades like a distressed lender. Its forward price-to-earnings ratio sits below 7x, and its price-to-tangible book value is just ~1.25x. For a company generating 24% return on equity and returning more than 10% of its market cap annually, this valuation simply doesn’t reflect the underlying fundamentals.

The chart below compares Synchrony to three peers in consumer lending, Discover Financial (DFS), Capital One (COF), and Citizens Financial Group (CFG):

Metric SYF DFS COF CFG Forward P/E ~6.7x ~8.2x ~7.9x ~9.3x Price/Tangible Book ~1.25x ~1.45x ~1.20x ~1.05x Return on Equity (ROE) ~24% ~23% ~12% ~10% Shareholder Yield (TTM) ~11% ~5% ~4% ~3.5%

Despite being the most shareholder-friendly of the group, Synchrony still trades at a discount to peers on a price-to-tangible book basis and remains well below sector averages on earnings multiples. Importantly, it achieves this with better capital efficiency ROE of 24% compared to 1023% for peers.

The market seems to be overpricing risk tied to Synchrony’s consumer credit exposure. Yet its net charge-off rates remain within historical norms, and the net interest margin is steady around 15.5%, showing little stress. Synchrony’s embedded finance model, diversified across retail, healthcare, and home improvement, helps mitigate category-specific cyclicality. If Synchrony simply trades in line with peers on P/E or tangible book, the stock could rerate by 3040%, even without earnings growth.

What Smart Money Is Doing

Synchrony Financial isn’t popular with fast-money traders, but it’s quietly attracting some of the sharpest long-term value investors in the market. Par Capital Management, known for taking concentrated positions in undervalued compounders, remains the company’s largest institutional backer. With over 7.5 million shares and an average cost basis of around $28, Par has earned over 140% on its position. Rather than trimming, the firm added more shares in recent filings, signaling a belief that Synchrony’s revaluation story isn’t close to finished, but Par isn’t alone. Francis Chou (Trades, Portfolio), a deeply contrarian value investor with a history of finding unloved financials, also holds a stake in Synchrony. His fund’s investment approach emphasizes margin of safety, free cash flow, and capital discipline, traits Synchrony delivers through its high ROE and aggressive buybacks.

Even Jeremy Grantham (Trades, Portfolio)’s GMO, known for its macro rigor and value discipline, has owned shares of Synchrony through its diversified funds. While not a top holding, its presence signals broader institutional recognition of the stock’s undervaluation relative to its returns. What these investors have in common is patience and a preference for durable economics over short-term narrative. Synchrony fits that mold: high returns, low valuation, disciplined capital allocation, and steady execution in a misunderstood sector.

The market may not have rerated the stock yet, but the smart money is already positioned for when it does.

Potential Risks

As a lender tied to consumer credit, particularly discretionary retail, Synchrony Financial is exposed to the usual cycle risks: changing interest rates, borrower delinquencies, and broader economic slowdowns. But what’s often missed is that these risks are already embedded in the price. Synchrony trades at under 7x forward earnings and just 1.25x tangible book, despite generating a 24% return on equity, a valuation that implies severe stress ahead. Yet the company’s net charge-off rate remains within historical norms, and its delinquency levels have stayed manageable, even through rising rate environments.

When it comes to funding risk, Synchrony stands on solid footing. Its debt maturity profile is laddered conservatively, with an average duration of nearly 5 years. Compared to Citizens Financial (CFG) and Capital One (COF), which rely more heavily on shorter-term wholesale funding, Synchrony locks in longer-term debt at fixed rates, reducing rollover risk during market stress. Synchrony also maintains a CET1 ratio above 13%, giving it an ample capital buffer relative to regulatory requirements. That compares favorably to peers like Discover and Citizens, which operate closer to minimum thresholds.

Regulatory scrutiny is another concern, particularly for private-label credit and transparency in consumer finance. But Synchrony has been proactive in adapting to enhanced disclosure requirements and continues to secure large partnerships with high-trust brands like Amazon and Lowe’s, signaling operational compliance and partner confidence. In short, Synchrony is priced like a company in crisis. But the fundamentals show the opposite: steady margins, risk-aware funding, and real capital strength. That disconnect is where long-term value emerges.

Finally

In a market obsessed with fast narratives and headline volatility, Synchrony Financial is doing something rarer: quietly compounding value. With disciplined capital returns, a fortress balance sheet, and embedded financing relationships across retail and healthcare, it’s delivering shareholder yield that most growth stocks can’t match, even at three times the valuation. Trading at a discount to every relevant peer on both earnings and tangible book, Synchrony still manages to lead on ROE and shareholder payout. It’s priced as if a crisis is imminent, yet the fundamentals tell a different story: charge-offs under control, margins intact, long-term debt locked in, and ample capital reserves.

Importantly, the company isn’t going unnoticed by those who matter. Par Capital, Francis Chou (Trades, Portfolio), and Jeremy Grantham (Trades, Portfolio)’s GMO have all taken positions, some with extraordinary gains already, because they understand what the broader market hasn’t: this isn’t a turnaround or a trade. It’s a rare case of mispriced stability. For investors seeking resilient cash flows, long-term buyback leverage, and underappreciated consistency in a volatile market, Synchrony Financial may be the most compelling under-the-radar compounder available today.

This article first appeared on GuruFocus.