Wednesday, November 9, 2022

Snap-on Incorporated (SNA) Dividend Stock Analysis

Snap-on Incorporated (SNA) manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial and Industrial Group, Snap-on Tools Group, and Repair Systems & Information Group segments.

The company has managed to grow dividends for 12 years in a row. The last dividend increase occurred in November 2022, when Snap-on’s Board of Directors hiked its quarterly dividend by 14% to $1.62/share. Over the past decade, the company has managed to boost its dividends at an annualized rate of 14.70%.

Snap-on has managed to grow earnings per share significantly during the past decade. Between 2011 and 2021, earnings per share grew roughly three-fold from $4.71 to $14.92. The company is expected to generate $15.27/share in 2022 and $16.14/share in 2023. 

The number of shares outstanding has stayed in a rather constant range over the past decade. The past three years have been a positive surprise. I would expect more in share repurchases over the next decade, in order to juice up the slow-down in organic earnings per share growth. 

The dividend payout ratio has consistently stayed a little below 30% over the past decade, with the brief spike during the financial crisis and the Covid crisis. A consistent payout ratio is good to see, as it shows that earnings and dividends tend to move in lockstep over the long-term. A lower payout ratio also offers some added margin of safety to insulate the distributions during any temporary bumps in earnings during recessions. 

Currently, Snap-On is attractively valued at 16.50 times forward earnings, and yields 2.83%.

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