Snap-on (NYSE:SNA) Has Announced That It Will Be Increasing Its Dividend To $1.86

The board of Snap-on Incorporated (NYSE:SNA) has announced that it will be increasing its dividend by 15% on the 11th of December to $1.86, up from last year's comparable payment of $1.62. This makes the dividend yield 2.4%, which is above the industry average.

See our latest analysis for Snap-on

Snap-on's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Snap-on's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Snap-on Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.52 in 2013 to the most recent total annual payment of $6.48. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Snap-on has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Snap-on's prospects of growing its dividend payments in the future.

We Really Like Snap-on's Dividend

Overall, a dividend increase is always good, and we think that Snap-on is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for Snap-on for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.