Stanley Black & Decker (SWK) is a company many people know well. The company manufactures hand and power tools and storage for construction professionals and consumers. It also manufactures industrial fasteners. SWK has many recognizable brand names, like Black+Decker, DeWalt, Stanley, Cub Cadet, Lenox, Craftsman, Troy-Bilt, and more.
Total sales were $16,947M in FY 2022 and $16,431M in the past twelve months.
According to Stock Rover*, the stock price is up +14.9% year-to-date and (-26.4%) in the trailing year after adjusting for dividends return. For perspective, the S&P 500 Index has been up +6.2% in the past twelve months.
Stanley Black & Decker is struggling with lower revenue and earnings per share because of higher interest rates. New home sales and renovation are suppressed, causing a drop in tool sales. Because sales are declining faster than costs, margins have compressed because of high inflation, affecting profits. That said, the company’s performance is cynical and impacted by the housing market, mortgage rates, and inflation. So, the challenges are not unexpected.
After the stock price decrease, SWK yields 3.78%, almost a decade high. This value is more than the 5-year average of 2.23%. However, the dividend yield soared to 5%+ during the Great Recession, so it is not the highest in recent memory. The payout ratio has climbed to ~68% because of the challenges faced by the company, but is usually low.
Source: Portfolio Insight*
The firm has a 56-year streak of dividend increases, placing it on the list of 2023 Dividend Kings. The growth rate has been consistent at 5% to 6% annually.
Source: Portfolio Insight*
The stock trades at an elevated earnings multiple because of lower earnings per share (EPS). But the cyclical nature of the EPS means the valuation will decline. However, the firm typically trades at a P/E ratio of 16X, and if we assume earnings return to 2019 levels, SWK is undervalued. However, if the United States economy enters a recession, the stock price could very well fall further. Consequently, it is best to keep an eye on this Dividend King.
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Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.