Snap-On (SNA) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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
Headquartered in Kenosha, Snap-On (SNA) is a Consumer Discretionary stock that has seen a price change of 19.49% so far this year. Currently paying a dividend of $1.62 per share, the company has a dividend yield of 2.37%. In comparison, the Tools - Handheld industry's yield is 0.79%, while the S&P 500's yield is 1.7%.
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 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. Snap-On's current payout ratio is 37%. This means it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SNA for this fiscal year. The Zacks Consensus Estimate for 2023 is $17.74 per share, which represents a year-over-year growth rate of 5.47%.
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. 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 is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Snap-On Incorporated (SNA) : Free Stock Analysis Report
