Last update on 2024-06-27

Snap-on (SNA) - Dividend Analysis (Final Score: 8/8)

Snap-on (SNA) has achieved a perfect score of 8/8 on our dividend analysis, demonstrating robust and reliable dividend payments.

Short Analysis - Dividend Score: 8

We're running Snap-on (SNA) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Trading at a higher dividend yield compared to the industry average often signifies an attractive income-generating investment.

Snap-on's current dividend yield of 2.3265% is substantially higher than the industry average of 1.67%. This historical analysis reflects a consistent dividend payout, demonstrated by the gradual uptick in its dividend per share, increasing from $1 in 2003 to $6.72 in 2023. The stock price has shown remarkable growth from $32.24 in 2003 to $288.84 in 2023. While the company's dividend yield has fluctuated, often dipping lower than its initial rate of 3.1017% in 2003, it has generally remained above the industry average. The steady increase in dividend payouts and stock price suggests a robust and appealing investment profile. Thus, the persistent above-average dividend yield is a positive indicator for Snap-on's prospective income-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is a measure of how much a company's dividend payments have increased over a certain period. A growth rate higher than 5% over 20 years is a strong indicator of a company's ability to enhance shareholder value through consistent improvement in dividend payments. It's significant because it signals financial health, earnings growth, and the company's commitment to return capital to shareholders. Sustainability of such a growth rate also highlights robust operational performance and optimism about future earnings.

The Dividend Ratio data from 2003 to 2023 shows some irregularities with certain years having no dividend payouts (like 2004, 2005, and 2009). However, considering the overall period, most increases are notably above 5%, reaching as high as 18.9189 in 2015 and 17.0886 in 2014. The average Dividend Ratio over the 20-year span is approximately 9.84, comfortably above the 5% threshold. This signifies that Snap-on has been able to gradually improve its dividend payments, reflecting strong financial health and a solid commitment to rewarding its shareholders. Despite some years of non-payment, the overall upward trend is healthy and denotes a positive outlook. Therefore, the trend is good, indicating that Snap-on has the capability to sustain and potentially increase its dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. The critical level for this ratio is often considered to be around 65%, as going beyond that can signal that a company is returning too much of its earnings and may not be reinvesting enough for future growth. Staying below this threshold indicates a more sustainable dividend policy.

Snap-on (SNA) has maintained an average payout ratio of approximately 39.15% over the past 20 years. This is considerably below the critical 65% threshold, which is a strong indicator of financial prudence. For instance, between 2008 and 2012, the ratios were consistently below 30%, showcasing the company's commitment to balancing dividend payments with reinvestment and financial stability. In general, the payout ratio staying well below 65% for an extended period demonstrates disciplined management and a sustainable approach to rewarding shareholders. This trend is positive for both dividend stability and growth potential.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings refers to the dividend payout ratio, which measures the proportion of earnings a company pays to its shareholders in the form of dividends. A lower ratio generally signifies that the company is retaining more earnings for growth and other needs, making the dividend more sustainable.

Analyzing the dividend payout ratio for Snap-on (SNA) over the years, we see a fluctuating yet overall stable pattern. From a high of 51.77% in 2009 to a low of 25.92% in 2014, the trend portrays that Snap-on's earnings sufficiently cover its dividends. Notably, in recent years (2022 and 2023), the ratios are 34.31% and 35.16%, respectively. A ratio under 50% is often viewed as a good balance, suggesting that Snap-on has consistently managed to cover its dividend payouts effectively. This is a favorable indicator for dividend sustainability, indicating Snap-on's commitment to dividend payments without stretching its earnings.

Dividends Well Covered by Cash Flow?

Explain the criterion for Snap-on (SNA) and why it is important to consider

Dividends covered by cash flow indicates the proportion of free cash flow that is paid out as dividends. A percentage below 100% indicates the company generates enough free cash flow to cover its dividends, signaling strong financial health. Consistently low percentages are desirable as they indicate dividend sustainability and the potential for future dividend growth.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Snap-on (SNA) and why it is important to consider

Stable dividends over two decades give confidence to income-seeking investors. These investors prioritize consistent returns without substantial drops. Stability indicates a company's robustness and predictability, crucial in preserving investment value over time.

Dividends Paid for Over 25 Years?

Reviewing whether Snap-on has paid dividends consistently for over 25 years can reveal the company's commitment to returning capital to shareholders. A long history of dividend payments usually indicates financial stability and shareholder-friendly management.

Snap-on (SNA) has indeed paid dividends consistently over the past 25 years, demonstrating a strong commitment to returning capital to shareholders. Over this period, the dividend per share has shown a clear uptrend, increasing from $0.86 in 1998 to $6.72 in 2023. This represents a compounded annual growth rate (CAGR) of approximately 8.33%, which is a significant indication of the company's financial health and profitability. The consistency and growth in dividends reflect positively on Snap-on's ability to generate stable and increasing cash flows, which is crucial for long-term investors who prioritize income reliability. This trend is very favorable for dividend growth investors and showcases Snap-on's financial stability and prudent management practices.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Over the last 20 years, Snap-on (SNA) has exhibited a sustained commitment to stock repurchase activities, as evidenced by the decline in the total number of shares outstanding. The company managed to reduce its share count from 58.4 million in 2003 to 52.9 million in 2023. The average repurchase rate of -0.4866 indicates that, on average, there has been nearly a half-percent reduction in the number of shares each year. Significant reductions occurred notably in the years 2004, 2007, 2008, 2009, 2017, 2018, 2019, 2020, 2021, 2022, and 2023, in which the company effectively bought back shares. The trend is generally positive as consistent share buybacks may reflect efficient capital management, thereby enhancing shareholder value through increased EPS (Earnings Per Share).