Last update on 2024-06-27

Stanley Black & Decker (SWK) - Dividend Analysis (Final Score: 7/8)

Reviewing Stanley Black & Decker's (SWK) strong dividend performance through an 8-criteria scoring model to help you make informed investment decisions.

Short Analysis - Dividend Score: 7

We're running Stanley Black & Decker (SWK) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A higher yield relative to peers can signal a more attractive income investment.

With a current dividend yield of 3.2824%, Stanley Black & Decker (SWK) significantly outperform the industry average of 1.67%. Historically, the firm's dividend yield has ranged broadly, peaking in challenging economic times like 2008 (3.695%) and 2020 (4.2332%), which can result from declining stock prices. SWK's yield surpassing the industry average suggests a potentially more favorable dividend income opportunity compared to peers. The company has consistently increased its dividend per share from $1.03 in 2003 to $3.22 in 2023, showcasing a strong commitment to returning value to shareholders. The stock price's notable volatility may account for some yield variation, but overall, this trend indicates a relatively good prospect for income-seeking investors.

Average annual Growth Rate higher than 5% in the last 20 years?

Examining the Dividend Growth Rate over a long period like 20 years is critical as it shows the company's commitment to returning value to shareholders and signals the overall health of the business.

Looking at the data for Stanley Black & Decker (SWK), we see that the Dividend Per Share Ratio started at 4.0404 in 2003 and exhibits considerable volatility over the years, peaking remarkably at 22.3881 in 2011 and dropping to zero in 2020. Calculating the compounded growth rate over these 20 years would involve myriad values exceeding 5%, but there are also significant drops, particularly in 2020. The average dividend ratio is approximately 5.87%, slightly above the desired 5% threshold. However, the high volatility and instances of zero dividends are concerning. This indicates a lack of consistency and reliability in dividend payments, suggesting a red flag for potential investors looking for stable dividend growth. Thus, while the average growth rate meets the threshold, the high variability and zero values are considered negative trends in the dividend policy.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is a key metric in dividend analysis, indicating the proportion of earnings a company returns to its shareholders as dividends.

For Stanley Black & Decker (SWK), the average payout ratio over the last 20 years is 36.71%, which is well below the 65% threshold. This suggests financial prudence and sustainability in their dividend policy, except for a few outliers like 2003, 2009, 2010, and especially 2023. Generally, this trend is favorable as it indicates that the company retains a significant portion of its earnings for reinvestment or to cushion against economic downturns.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The earnings per share (EPS) comparison to dividends per share (DPS) indicates how well the dividends are covered by the company's earnings. This criterion is crucial because it ensures the sustainability of dividend payouts and reflects the company's profitability. Looking at Stanley Black & Decker's (SWK) EPS data ranging from 1.27 in 2003 to -2.07 in 2023, contrasted with dividends per share growing from 1.03 to 3.22 in the same period, the substantial fluctuations and eventual drop to negative EPS in 2023 raise concerns. The coverage ratio being below 1 in several years, notably negative in 2023, means dividends have not been consistently covered by earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by free cash flow involve evaluating whether a company generates enough cash to comfortably pay dividends to its shareholders.

For Stanley Black & Decker (SWK), the dividend coverage ratio by free cash flow oscillates considerably over the years. The healthier the ratio, the more secure the dividend is. Optimal coverage is typically above 1, meaning the free cash flow exceeds the dividend payout. However, for SWK, ratios vary significantly, peaking in 2021 at 3.428, juxtaposed by a severe drop to -0.237 in 2022—showing cash flow inadequacy to cover dividends safely. Importantly, good periods like in 2021 are positive, but the sudden drop should be a cause for concern for future sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years signify financial robustness and reliability for income-seeking investors, showing that the company consistently generates enough profit to share with shareholders.

Stanley Black & Decker has shown impressive consistency in its dividend payments over the past two decades. The dividend per share has generally experienced steady growth, rising from $1.03 in 2003 to $3.22 in 2023. This trend indicates solid financial management and reliability, making it attractive for income-seeking investors. However, there was at least one instance where the dividend dropped by 20%. Despite this, the overall stability and upward trajectory of the dividend payments underscore the company's financial health and commitment to returning value to shareholders.

Dividends Paid for Over 25 Years?

Consistency in paying dividends for over 25 years is a critical parameter because it showcases a company's reliability in returning value to shareholders. It is an indicator of financial stability and sound management.

Stanley Black & Decker has demonstrated notable consistency in paying dividends over the past 26 years, with the dividend per share increasing gradually from $0.83 in 1998 to $3.22 in 2023. Additionally, the ability to not just maintain but raise its dividend over time paints a positive picture of the company's financial health and commitment to shareholder returns. Investors looking for stable income would find this trend highly favorable.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years?

Examining the number of shares of Stanley Black & Decker (SWK) over the past 20 years, we find that the company achieved reliable stock repurchases in 10 out of these 20 years. The average number of shares repurchased annually is approximately 4.1619 million. Reliable stock repurchases indicate an intention by the management to return value to shareholders and can signal the company's confidence in its own financial health and future prospects. The trend appears mostly stable, although the years with repurchases are sporadic rather than consistent. This sporadic nature could reflect market conditions or strategic financial decisions by the company. Overall, the trend appears good as the company has still managed to return capital to shareholders regularly over the long term.