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Snap-on Inc's Dividend Analysis

A Comprehensive Look at Snap-on Inc's Upcoming Dividend and Historical Performance

Snap-on Inc (NYSE:SNA) recently announced a dividend of $1.86 per share, payable on 2023-12-11, with the ex-dividend date set for 2023-11-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Snap-on Inc's dividend performance and assess its sustainability.

What Does Snap-on Inc Do?

Snap-on manufactures premium tools and software for repair professionals. Hand tools are sold through franchisee-operated mobile vans that serve auto technicians who purchase tools at their own expense. A unique element of its business model is that franchisees bear significant risk, as they must invest in the mobile van, inventory, and software. At the same time, franchisees extend personal credit directly to technicians on an individual tool basis. Snap-on currently operates three segments: repair systems and information, commercial and industrial, and tools. Its finance arm provides financing to franchisees to run their operations, which includes offering loans and leases for mobile vans.

Snap-on Inc's Dividend Analysis
Snap-on Inc's Dividend Analysis

A Glimpse at Snap-on Inc's Dividend History

Snap-on Inc has maintained a consistent dividend payment record since 1986, distributing dividends on a quarterly basis. The company has also demonstrated a commitment to growing its dividends, having increased them annually since 1995. This consistent increase qualifies Snap-on Inc as a dividend aristocrat, a prestigious group of companies that have raised their dividends for at least 28 consecutive years. Below is a chart showing annual Dividends Per Share to track historical trends.

Snap-on Inc's Dividend Analysis
Snap-on Inc's Dividend Analysis

Breaking Down Snap-on Inc's Dividend Yield and Growth

Snap-on Inc currently boasts a 12-month trailing dividend yield of 2.33% and a forward dividend yield of 2.68%, indicating an anticipated increase in dividend payments over the next year. The company's dividend growth has been impressive over multiple timeframes. The 3-year annual dividend growth rate stands at 14.40%, the 5-year at 14.70%, and the 10-year at a robust 15.60%. These growth rates translate to a 5-year yield on cost of approximately 4.63% for Snap-on Inc stock as of today.

Snap-on Inc's Dividend Analysis
Snap-on Inc's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

The sustainability of Snap-on Inc's dividend is underpinned by its dividend payout ratio, which stands at 0.35 as of 2023-09-30. This metric indicates that the company retains a substantial portion of its earnings for future growth and potential downturns. Snap-on Inc's profitability rank further supports dividend sustainability, with GuruFocus awarding it a perfect score of 10 out of 10, reflecting excellent profitability prospects. The company has also reported positive net income each year for the past decade, reinforcing its financial stability.

Growth Metrics: The Future Outlook

For dividends to be sustainable, a company must exhibit strong growth metrics. Snap-on Inc's growth rank of 10 out of 10 suggests a favorable growth trajectory compared to its competitors. The company's revenue per share has grown by an average of 7.50% annually, outperforming approximately 53.01% of global competitors. Additionally, Snap-on Inc's 3-year EPS growth rate of 10.80% per year and a 5-year EBITDA growth rate of 10.40% also outperform more than half of global competitors, showcasing the company's solid earnings and operational efficiency.

Engaging Conclusion: The Dividend Outlook for Snap-on Inc

Considering Snap-on Inc's consistent dividend payments, robust growth in dividend rates, prudent payout ratio, and strong profitability and growth metrics, the company's dividend appears to be on solid footing. Investors seeking income and growth may find Snap-on Inc an attractive proposition. Will this trend of dividend aristocracy and financial health continue to offer value to shareholders in the years to come? For those interested in exploring further, GuruFocus Premium users can utilize the High Dividend Yield Screener to discover other high-dividend-yield investment opportunities.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.