Dividend Kings In Focus: Stanley Black & Decker – Positive Dividend

Up to date on October twenty eighth, 2024 by Felix Martinez

Corporations with lengthy observe information of dividend development are amongst our favourite shares. Lengthy dividend development streaks exhibit an organization’s capability to extend its distributions throughout a recession.

Buyers’ revenue wants don’t disappear throughout recessions, in order that they need to be as assured as doable that their investments will proceed to pay dividends.

Corporations with greater than 53 years of dividend development have managed to navigate a number of recessions and nonetheless improve their funds.

You may see all 53 Dividend Kings right here.

You can too obtain an Excel spreadsheet with the complete checklist of Dividend Kings (plus essential metrics akin to price-to-earnings ratios and dividend yields) by clicking on the hyperlink under:

This milestone is spectacular for any firm, however it’s much more so for these which might be extraordinarily delicate to financial circumstances.

One of many extra cyclical Dividend Kings is Stanley Black & Decker (SWK).

This text will study the corporate’s enterprise, prospects for development, and future returns in an effort to find out if now could be the best time to buy this Dividend King.

Enterprise Overview

Stanley Black & Decker is a world chief within the space of energy instruments, hand instruments, and associated merchandise. The corporate maintains the highest place in instruments and storage gross sales worldwide. SWK operates within the industrial sector.

The corporate consists of three segments: instruments & out of doors, and industrial.

Supply: Investor Presentation

The corporate reported second-quarter 2024 outcomes, highlighting enhancements in gross margin as a result of decrease stock destocking prices, provide chain efficiencies, and decreased delivery bills. The corporate achieved $4 billion in quarterly income, with natural development in core manufacturers like DEWALT and Outside Merchandise. Regardless of a 3% year-over-year income decline as a result of divestitures and foreign money impacts, adjusted gross margin rose to 29.2%, a 560-basis-point enchancment over the prior yr. The corporate generated robust money circulation, totaling $486 million in free money circulation, and decreased its debt by $1.2 billion, supported by proceeds from its infrastructure divestiture.

The corporate’s ongoing price discount initiatives are anticipated to ship $1.5 billion in pre-tax run-rate financial savings by the top of 2024 and $2 billion by 2025. These efforts deal with provide chain transformation, strategic sourcing, and operational effectivity to revive adjusted gross margins to over 35%. The Instruments & Outside section remained regular in gross sales, with development pushed by DEWALT and out of doors merchandise, whereas the Industrial section confronted a gross sales drop as a result of divestitures and foreign money results however maintained a 13.5% section margin by value management and price administration. Complete pre-tax run-rate financial savings reached $1.3 billion for the reason that program’s 2022 inception.

Trying forward, Stanley Black & Decker has revised its full-year earnings steerage, now forecasting GAAP EPS between $0.90 and $2.00 and elevating adjusted EPS to between $3.70 and $4.50. The corporate elevated its free money circulation outlook to $650 million—$850 million, with plans for additional debt discount. Stanley Black & Decker goals to leverage its price financial savings to fund development initiatives in its core markets, specializing in model power, product innovation, and enhanced buyer engagement to drive long-term development and shareholder worth.

Development Prospects

Stanley Black & Decker’s earnings per share have been flat over the past decade. Within the years since, nevertheless, They’ve typically risen constantly earlier than 2022.

We now anticipate the corporate to develop earnings-per-share at a fee of 8% yearly going ahead, as Stanley Black & Decker’s outcomes are ranging from a low base.

Stanley Black & Decker has turn out to be the worldwide chief in instruments and associated merchandise due to its iconic manufacturers, akin to Stanley, DeWalt, and Black & Decker. These names are identified and trusted by skilled contractors and do-it-yourself prospects.

This could assist propel development as soon as provide chain constraints and better inflationary pressures ease.

Supply: Investor Presentation

Whereas natural development has been stable through the previous decade, the corporate additionally benefited from strategic acquisitions. In reality, the corporate has allotted round $10 billion in acquisitions since 2005 to advance development alternatives.

Maybe its most vital acquisition was the $900 million buy of the Craftsman model from Sears Holdings in 2017.

We anticipate the corporate to develop earnings-per-share by 8% per yr over the subsequent 5 years.

Aggressive Benefits & Recession Efficiency

Stanley Black & Decker’s key aggressive benefit stays its well-known manufacturers. The corporate additionally spends closely on analysis and improvement in an effort to deliver new merchandise to market.

Like most cyclical firms, Stanley Black & Decker wants a financially wholesome client and a stable economic system to ship bottom-line development.

This was not the case through the Nice Recession. The corporate’s adjusted earnings-per-share outcomes are listed under earlier than, throughout, and after the final recession.

2007 adjusted earnings-per-share: $4.00 (15.3% improve)
2008 adjusted earnings-per-share: $3.41 (14.8% lower)
2009 adjusted earnings-per-share: $2.72 (20.2% lower)
2010 adjusted earnings-per-share: $3.96 (45.6% improve)

As you possibly can see, Stanley Black & Decker was removed from proof against the final recession. Adjusted EPS fell greater than 30% from 2007 to 2009. Nonetheless, the corporate shortly recovered and posted a brand new excessive for adjusted EPS in 2010.

Valuation & Anticipated Returns

Stanley Black & Decker’s present share value is ~$103. The corporate expects adjusted earnings-per-share of $4.10 for 2024. SWK inventory has a 2024 price-to-earnings ratio of 25.1. Given the continuing struggles with inflation, we reaffirm our honest worth P/E of 12 occasions earnings.

Nonetheless, if the P/E ratio decreases from 25.1 to 12 over the subsequent 5 years, annual shareholder returns would lower by 4.4% yearly.

Together with 8% anticipated EPS development and the three.2% dividend yield, complete returns will attain 6.8% per yr over the subsequent 5 years.

Remaining Ideas

Stanley Black & Decker is the undisputed chief in its trade. The corporate continues to spend money on R&D and pursue acquisitions that ought to allow it to proceed rising.

Stanley Black & Decker additionally has greater than 5 many years of dividend development, proving itself able to rising its dividend even beneath hostile financial circumstances.

The inventory seems to be overvalued, with a five-year anticipated return of 6.8% per yr. In consequence, we fee Stanley Black & Decker a blue-chip inventory to carry for dividend development and complete returns.

The next articles include shares with very lengthy dividend or company histories, ripe for choice for dividend development traders:

The Excessive Yield Dividend Kings Listing is comprised of the 20 Dividend Kings with the very best present yields.
The Excessive Dividend Shares Listing: shares that enchantment to traders within the highest yields of 5% or extra.
The Month-to-month Dividend Shares Listing: shares that pay dividends each month, for 12 dividend funds per yr.
The Dividend Champions Listing: shares which have elevated their dividends for 25+ consecutive years.Observe: Not all Dividend Champions are Dividend Aristocrats as a result of Dividend Aristocrats have extra necessities like being in The S&P 500.