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Snap-On (SNA) is a Top Dividend Stock Right Now: Should You Buy?

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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

Snap-On (SNA - Free Report) is headquartered in Kenosha, and is in the Consumer Discretionary sector. The stock has seen a price change of 29.15% since the start of the year. Currently paying a dividend of $1.23 per share, the company has a dividend yield of 2.23%. In comparison, the Tools - Handheld industry's yield is 0.47%, while the S&P 500's yield is 1.36%.

Taking a look at the company's dividend growth, its current annualized dividend of $4.92 is up 10.1% 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 15.03%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Snap-On's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, SNA expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $13.96 per share, with earnings expected to increase 20.03% from the year ago period.

Bottom Line

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SNA presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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