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Snap-On (SNA) is a Top Dividend Stock Right Now: Should You Buy?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Snap-On in Focus
Headquartered in Kenosha, Snap-On (SNA - Free Report) is a Consumer Discretionary stock that has seen a price change of 8% so far this year. The tool and diagnostic equipment maker is paying out a dividend of $1.62 per share at the moment, with a dividend yield of 2.63% compared to the Tools - Handheld industry's yield of 0.19% and the S&P 500's yield of 1.63%.
Taking a look at the company's dividend growth, its current annualized dividend of $6.48 is up 10.2% from last year. In the past five-year period, Snap-On has increased its dividend 5 times on a year-over-year basis for an average annual increase of 14.61%. 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 39%, meaning it paid out 39% 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 $17.09 per share, which represents a year-over-year growth rate of 1.61%.
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.
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. Income investors must be conscious 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).