As a true dividend aristocrat, Stanley Black & Decker intends to get out of the rut

Published: 2025-05-20 04:46:01 ET SWK

Published on 05/20/2025 at 04:46

By Kevin Smith

The manufacturer of DIY and gardening tools embarked on a major restructuring plan two years ago that aims to double its operating profit by 2027.

The shock therapy was urgently needed due to a painful paradigm: despite satisfactory growth—revenue has risen from $11.3bn to $15.4bn over the last decade—margins have been eroding steadily due to a lack of pricing power in the face of fierce and cheaper competition.

Owner of the famous DeWalt, Craftsman, Stanley, Black+Decker and other brands, the Maryland-based group has been unable to capitalize on its heritage and premium positioning in the public's heart. As a result, despite significant revenue growth, in 2024 its operating profit was lower than it was ten years earlier.

Like many equipment manufacturers and distributors linked to the construction and discretionary consumption sectors, Stanley Black & Decker has not really  recovered from the pandemic well. The downturn has been evident since 2022, when, for the first time in its history, a working capital adjustment has pushed cash flow deep into the red.

Despite these difficulties and some risky management decisions over the last cycle, Stanley Black & Decker is a renowned dividend aristocrat on the US stockmarket. Its dividend per share has risen steadily over the last 57 years, and despite margin compression, this distribution remains adequately covered by cash flow.

As such, it could make sense to bet on the success of the restructuring plan. Over 20 years, the group's net margin has been 7%. If the group were to return to this level, it could generate net income of at least $1.1bn within two years. Under these conditions, it is difficult not to find the current valuation—market capitalization of $11bn—attractive.

This is especially true when you consider that before the pandemic, Stanley Black & Decker shares were trading at an average of 21 times earnings on the stockmarket, and that at this price, the stock offers a dividend yield of 4.6% to shareholders willing to wait.

Kevin Smith