Yahoo Finance Why Snap-On (SNA) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Snap-On in Focus
Based in Kenosha, Snap-On (SNA) is in the Consumer Discretionary sector, and so far this year, shares have seen a price change of 14.34%. The tool and diagnostic equipment maker is currently shelling out a dividend of $1.62 per share, with a dividend yield of 2.48%. This compares to the Tools - Handheld industry's yield of 0.84% and the S&P 500's yield of 1.75%.
Looking at dividend growth, the company's current annualized dividend of $6.48 is up 10.2% from last year. In the past five-year period, Snap-On has increased its dividend 5 times on a year-over-year basis for an average annual increase of 14.80%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Snap-On's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SNA expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $17.74 per share, which represents a year-over-year growth rate of 5.47%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that SNA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Snap-On Incorporated (SNA) : Free Stock Analysis Report
