Why Snap-On (SNA) is a Great Dividend Stock Right Now
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Snap-On (SNA) have what it tak...
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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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 31.44% so far this year. Currently paying a dividend of $1.23 per share, the company has a dividend yield of 2.19%. In comparison, the Tools - Handheld industry's yield is 0.47%, while the S&P 500's yield is 1.39%.
Looking at dividend growth, the company's current annualized dividend of $4.92 is up 10.1% from last year. Snap-On has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 15.03%. 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 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
SNA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $14.14 per share, with earnings expected to increase 21.58% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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SnapOn Incorporated (SNA): Free Stock Analysis Report
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