Are You Looking for a High-Growth Dividend Stock?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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
Snap-On (SNA) is headquartered in Kenosha, and is in the Consumer Discretionary sector. The stock has seen a price change of 11.14% since the start of the year. The tool and diagnostic equipment maker is paying out a dividend of $1.62 per share at the moment, with a dividend yield of 2.55% compared to the Tools - Handheld industry's yield of 1.04% and the S&P 500's yield of 1.75%.
Taking a look at the company's dividend growth, its current annualized dividend of $6.48 is up 10.2% from last year. Over the last 5 years, Snap-On has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.78%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Snap-On's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.
SNA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $18.45 per share, which represents a year-over-year growth rate of 9.69%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. With that in mind, SNA is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Snap-On Incorporated (SNA) : Free Stock Analysis Report
