Market value: $24.7 billion
Dividend yield: 1.8%
Never heard of Synchrony Financial (SYF, $32.63)? Actually, you may be familiar with this company, even without realizing it.
Synchrony Financial is the finance arm that General Electric (GE) spun out in 2015. You may be a user of Synchrony’s services and not even realize it. If you have a credit card issued by Lowe’s (LOW, Walmart (WMT), PayPal (PYPL), Gap (GPS), Amazon (AMZN) or several dozen other businesses, Synchrony is taking care of a big chunk of the stuff you never see being done.
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Intuitively, the business is a double-edged sword. On the one hand, a strong economy spurs more spending, and Synchrony pockets a small cut of larger and more numerous credit-card purchases. On the other hand, with interest rates edging higher and the economy still being cyclical, investors may rationally fear that there’s not an overly compelling future here.
But those doubts may be overblown. The provider of private-label credit cards has strong relationships with the retailers it serves, and it enjoys abnormally high interest rates that it charges those stores’ customers. It could weather most plausible economic storms – and one isn’t necessarily guaranteed to pop up.
Until then, U.S. consumers are still willing to spend, spend, spend. Credit card debt for American consumers hit another record, surpassing $1 trillion last year.
