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Snap-on (SNA) Cheers Investors With More than 15% Dividend Hike

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Snap-on Incorporated (SNA - Free Report) is one of the companies to resume dividend payments. It is now offering strong shareholder returns. The global provider of professional tools and equipment announced the 12th successive annual dividend hike. It will now pay out a dividend of $1.42 per share, suggesting a 15.4% rise from the prior rate of $1.23. The increased dividend will be paid out on Dec 10 to shareholders of record as of Nov 19, 2021.

Based on the share price of $209.60 on Nov 4, the annual dividend comes to $4.92 per share, resulting in an annualized yield of 14.1%. The company’s current dividend payout ratio is 34%. Solid dividend payouts are the most significant enticement for investors and Snap-on is committed to boosting shareholders’ wealth. Notably, it is a windows-and-orphan stock with a long history of regular reliable dividends. In 2020, the company paid out $243.3 million of dividends to shareholders.

Management also replaced its current share repurchase program with a new one through which it can buy back up to $500 million worth of common stock. At the end of third-quarter 2021, the company had $194 million remaining in its existing share repurchase plan. With the expansion in the share repurchase plan, the new repurchase availability stands at $503 million.

What Else Should You Know?

Snap-on remains on track with its robust business model, which helps it in enhancing value-creation processes, in turn, improving safety, quality of service, customer satisfaction and innovation. Its growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationships with repair shop owners and managers, and expanding critical industries in emerging markets.

The company is also progressing well with its Rapid Continuous Improvement (“RCI”) program. The RCI process is designed to enhance organizational effectiveness and minimize costs beside helping it boost sales and margins, and generate savings. Savings from the RCI initiative reflect gains from the continuous productivity and process improvement plans. Management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiatives and further investments.

Driven by these factors, its top and bottom lines beat the Zacks Consensus Estimate in third-quarter 2021, marking the fifth straight earnings beat and the sixth consecutive sales surprise. Both earnings and sales improved year over year. The top line also advanced 15.1% from third-quarter 2019’s reported figure.

The company witnessed improved performances in all three segments. Gains from the RCI initiative contributed to margins in the third quarter. Higher sales and margin expansion boosted the bottom line. Adjusted earnings grew 8.8% and 20.6% from third-quarter 2020 and 2019, respectively.

Encouragingly, shares of this Zacks Rank #3 (Hold) company have advanced 24.5% year to date compared with the industry‘s growth of 14.4%.

 

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However, Snap-on continues to reel under potential threats of new COVID-19 variants and supply-chain headwinds. Rising cost inflation, stemming from higher raw material expenses and increased transportation costs, is likely to remain a deterrent.

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