We recently compiled a list of the Dividend Kings List: Top 15. In this article, we are going to take a look at where Stanley Black & Decker, Inc. (NYSE:SWK) stands against the other dividend kings you should know about.
Dividend Kings are a distinguished group of companies that have achieved at least 50 consecutive years of dividend increases. While some of these companies are part of the S&P index, the two categories are not entirely overlapping. The appeal of Dividend Kings became especially clear after the disruptions caused by the COVID-19 pandemic in 2020. During this time, numerous companies either reduced or suspended their dividends, leaving income-focused investors disappointed. Many had assumed that dividend-paying stocks were inherently lower risk, only to face steep share price drops alongside payout cuts. However, Dividend Kings stand out for their remarkable consistency, boasting 50 years of uninterrupted dividend increases. This long history of reliable payouts provides a sense of stability, even in volatile market conditions.
Investors often gravitate toward firms with a track record of consistent dividend growth, as such companies tend to perform well in declining or stagnant markets. Even during periods of strong market performance, dividend growers have captured a significant share of the gains. Following a long-term dividend growth strategy can aid in compounding returns for investors. A T. Rowe Price report highlighted that, between 1985 and 2022, companies in the Russell index that consistently increased dividends outperformed the broader benchmark. Furthermore, these companies exhibited lower price volatility compared to the overall market.
Earning income through dividend stocks is a gradual process that requires patience and a commitment to long-term investing. These stocks are particularly suited for investors with a long-term horizon, as they have consistently outpaced inflation over time. According to data from Morningstar and Yale University’s Robert Shiller, since 1871, the market’s dividends per share have grown at an annualized rate 1.6 percentage points higher than inflation. Moreover, the gap between dividend growth and inflation has widened in recent years. Over the past 50 years, dividends have outpaced inflation by 2.5 percentage points annually, and in the last 20 years, the margin has grown to 4.6 percentage points per year.
During market rallies, dividend-growing stocks may underperform as investor enthusiasm and momentum often take precedence over fundamentals such as valuation and business quality. This trend has been especially noticeable in the recent past, with dividend stocks lagging behind the broader market. Nonetheless, maintaining a long-term strategy centered on dividend growth can be advantageous, as the benefits accumulate over time with each increase in payouts. Companies with solid fundamentals and robust financial stability are typically well-positioned to sustain and grow their dividends. In contrast, smaller or emerging businesses often prioritize reinvesting earnings into their operations to fuel growth. Given this, we will take a look at some of the best dividend kings with the highest yields.
Our Methodology:
To create this list, we examined a set of over 50 dividend king companies, recognized for consistently increasing dividends for 50 years or more. From this group, we selected companies with the highest dividend yields as of December 3 and organized them in ascending order based on their yield, from lowest to highest. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 900 as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A toolbox filled with an array of different tools, representing the professional products of the company.
Stanley Black & Decker, Inc. (NYSE:SWK)
Dividend Yield as of December 3: 3.69%
Stanley Black & Decker, Inc. (NYSE:SWK) ranks sixth on our list of the best dividend kings. The Connecticut-based manufacturing company deals in industrial tools, household hardware, and security products. Industrial manufacturers have faced a tough year, and Stanley experienced sluggish demand in its key markets during the third quarter. Declines in interest-sensitive sectors like consumer DIY tools and the automotive industry outweighed growth in aerospace and a rebound in industrial fasteners. Since the start of 2024, the stock has declined by over 10%.
In Q3 2024, Stanley Black & Decker, Inc. (NYSE:SWK) reported revenue of $3.75 billion, which fell by over 5% from the same period last year, as well as missed analysts’ estimates by $52.4 million. However, the company achieved improvements in gross margins and strong cash generation, driven by the effective execution of its operational priorities. In the future, it aims to drive organic revenue growth at a rate of 2 to 3 times faster than the market by focusing on innovation and electrification and expanding its presence in global markets.
Stanley Black & Decker, Inc. (NYSE:SWK)’s cash generation was a relief for income investors. In the third quarter of 2024, the company generated $286 million in operating cash flow and its free cash flow came in at approximately $200 million. The free cash flow facilitated a debt reduction of approximately $100 million during the third quarter. The company pays a quarterly dividend of $0.82 per share and has a dividend yield of 3.69%, as of December 3. It maintains a 58-year streak of consistent dividend growth.
Stanley Black & Decker, Inc. (NYSE:SWK) remained popular among elite funds at the end of Q3 2024, with hedge fund positions in the company growing to 29, from 24 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a consolidated value of over $516.6 million.
Overall SWK ranks 6th on our list of the dividend kings you should know about. While we acknowledge the potential of SWK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SWK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
