Snap-on Incorporated (NYSE:SNA) Looks Interesting, And It's About To Pay A Dividend

Explore Snap-on's Fair Values from the Community and select yours

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Snap-on Incorporated (NYSE:SNA) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Snap-on investors that purchase the stock on or after the 19th of August will not receive the dividend, which will be paid on the 10th of September.

The company's next dividend payment will be US$2.14 per share. Last year, in total, the company distributed US$8.56 to shareholders. Based on the last year's worth of payments, Snap-on has a trailing yield of 2.6% on the current stock price of US$324.72. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Snap-on paying out a modest 43% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Snap-on

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:SNA Historic Dividend August 15th 2025

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Snap-on earnings per share are up 8.8% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Story continues

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Snap-on has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Snap-on an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Snap-on is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Snap-on is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Snap-on, and we would prioritise taking a closer look at it.

Ever wonder what the future holds for Snap-on? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

View comments