Snap-on Inc's Dividend Analysis
Understanding the Dividend Prospects of Snap-on Inc
Snap-on Inc (NYSE:SNA) recently announced a dividend of $1.86 per share, payable on 2024-03-11, with the ex-dividend date set for 2024-02-23. 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?
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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.
A Glimpse at Snap-on Inc's Dividend History
Snap-on Inc has maintained a consistent dividend payment record since 1986. Dividends are currently distributed on a quarterly basis.
Snap-on Inc has increased its dividend each year since 1995. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 29 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Snap-on Inc's Dividend Yield and Growth
As of today, Snap-on Inc currently has a 12-month trailing dividend yield of 2.52% and a 12-month forward dividend yield of 2.80%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Snap-on Inc's annual dividend growth rate was 14.60%. Extended to a five-year horizon, this rate decreased to 14.50% per year. And over the past decade, Snap-on Inc's annual dividends per share growth rate stands at an impressive 15.50%.
Based on Snap-on Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Snap-on Inc stock as of today is approximately 4.96%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Snap-on Inc's dividend payout ratio is 0.36.
Snap-on Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Snap-on Inc's profitability 10 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Snap-on Inc's growth rank of 10 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Snap-on Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Snap-on Inc's revenue has increased by approximately 9.60% per year on average, a rate that outperforms approximately 58.1% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Snap-on Inc's earnings increased by approximately 18.10% per year on average, a rate that outperforms approximately 60.04% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 10.60%, which outperforms approximately 56.19% of global competitors.
Next Steps
For value investors seeking a blend of stable dividend income and potential for growth, Snap-on Inc presents a compelling case. The company's impressive track record of dividend payments, robust dividend growth rate, prudent payout ratio, and strong profitability and growth metrics lay a solid foundation for future performance. As Snap-on Inc continues to navigate the dynamic market landscape, investors may consider the stock a valuable addition to their dividend-focused portfolios. For further investment research and to discover other high-dividend yield opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener.
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.
