Stanley Black & Decker, Inc. Stock Analysis (SWK)

I’m always on the hunt for a new, outstanding dividend growth stock to add to my portfolio or add to my next watch list.  To start this search, I pulled up a handy listing of Dividend Aristocrats and began digging away.  After some research, there was one stock that caught my eye and made my ears perk.  So you know what, I decided to perform a stock analysis on the company and see how well the company fit my portfolio.  That company is…Stanley Black & Decker, Inc. (SWK).  Let’s see how well the company performed when put through the Dividend Diplomats Stock Screener and a few other metrics!

SWK Logo

One more thing I wanted to share with you all before I begin the analysis.  There is one more reason why I want to take a close look at SWK.  Last year, I created an “Always Buy” stock list that consisted of five Dividend Aristocrats that, well the name of the list says it, am always willing to buy.  It was created out of a tough investing lesson that was learned because I did not have a watch list prepared and missed a flash sale in the market.  The intent of the list was to create a listing of stocks that I loved and  would allow me to act immediately versus spending precious time performing the research to determine which stock was the best at the time.   Over time, things change with companies (prices appreciate, fundamentals are different, etc.) and so must my “Always Buy” list.   Not guaranteeing a move will be made, but I should at least review more stocks out there to see if I should add another one to the listing.  This analysis isn’t only to identify if SWK is potentially undervalued at the moment; it is also to determine if I should consider it an “Always Buy” stock.

About Stanley black & Decker, Inc. (SWK)

From the company’s website: “Stanley Black & Decker provides the tools, solutions, and services that the world counts on when it really matters. We build the tools that build and repair your home and car, we build the tools that build and repair your infrastructure, and we provide the services and solutions that protect what’s most valuable to you.”  Some of the major services provided are a commercial security, healtchare & hospital services, and pipeline services.   Their tools can be found in every hardware store and are a household name in the industry.  If you are a handy person (disclaimer: I am NOT) or enjoy browsing hardware stores, I would be shocked if you weren’t familiar with the brand.

The company had a pretty strong quarter as well based on their most recent press release and 10-Q, which can’t be said for the releases by two companies on my most recent watch list.  In the first quarter of 2016, SWK’s revenue increased 2% compared to the prior year while margins and operating expenses remained the same.   There were two items that jumped out of the earnings release.   The company announced a 20% increase in diluted EPS compared to the prior period due and the company increased their EPS forecast for the remainder of the year.  Quite rare in this economic environment if you ask me.  Overall, the company’s stock price has appreciated 4.2% YTD as of 5/3/16 close and the company has a current dividend yield of ~2%.    Now that we know about the company and their recent performance, let’s dive into the metrics.

Dividend diplomats stock screener & other metrics

While not impossible, it was difficult to find a company to compare SWK’s metrics against.  So for the purposes of this analysis, I will review just SWK’s metrics.  First, let’s start with the three metrics of our stock screener.

Metric #1: P/E Ratio Less Than S&P 500.   Per, the S&P 500s current and forward P/E ratios are 24.12X and 17.65X , respectively.  As of 5/3/16 close date, SWK is trading at $110.58.  Using the estimated FY ’16 earnings from of $6.35, the company’s forward P/E Ratio is 17.41X, which is lower than the S&P 500.  While it is close, SWK squeaks by on this metric.

Metric #2:  Payout Ratio Less than 60%.  We use a 60% threshold for the purposes of our screener. The company pays out a $.55/share quarterly dividend; using the Estimated 2016 EPS figures above, the forward payout ratio is 34%.  Another Pass for SWK.

Metric #3: Increasing Dividends.  This one is easy.  SWK is a Dividend Aristocrat and has increased their dividend for 48 consecutive years.  The company has been a Dividend Aristocrat for almost as long as I have been born.  I would say this one is a pass with flying colors!

Mertic #4: Share Buybacks.  Share buybacks can be huge news for dividend investors.  Why? A reduced share count increases EPS and lowers the payout ratio for the company.   Further, it can be a great indicator that management believes the company is undervalued.   Between February 1 and April 15 (the most recent shares outstanding per the 10-K and 10-Q), shares decreased 2.2m, or 1.4%.  That decline occurred over a two and a half month period and the annualized decrease is 6.72%.  That’s a heck of a lot of shares!

Metric #5: Dividend Growth Rate.  Okay, I know our stock screener only looks for increasing dividends.  But we love the dividend growth rate and it can have such an immense impact on your forward dividend income.  Plus, as Lanny noted last week, some of the larger companies have been announcing less than stellar dividend increases lately (cough, cough, PG).   SWK’s 3 and 5 year dividend growth rates are 4.9% and 8.97%, respectively.   Honestly, with SWK’s payout ratio, dividend yield, and earnings growth, I was expecting the amount to be higher.  Seems like SWK has been hit with the same bug as others and announced smaller and smaller dividend increases.   The company’s next dividend increase should be announced in July, so we will be able to see if they reverse this recent trend.

Metric #6:  5-Year Average Yield.  We will also compare the current dividend yield to the company’s 5 year average dividend yield to determine if there is potential value to be unlocked.  SWK’s current yield of ~2% is less than their 5 year average dividend yield of 2.2%.  No surprising when you look at the company’s recent stock chart and see the appreciation that has occurred over the last few months.


There is a lot to like about SWK.  The company is priced in line with the market, has a low payout ratio, has a long-term history of increasing their dividend, and is reducing their share count.  However, the company is not a screaming buy at the moment based on the average dividend increases and the results of metric #6.  Just my opinion though based on the results of the metrics reviewed.  That being said, I am going to add SWK to my next watch list.  If the price falls a little further, I will strongly consider buying and adding the stock to my portfolio.  Then, the dividend yield will inch towards the 5 year average yield and the company will trade at a further discount compared to the marketplace.  However, maybe I am being too picky with the current valuation of SWK considering that the market has been on a tear over the last few months, causing Lanny and many others to hoard cash for an insane period of time as they sit on the sidelines.   One quick note is that it would be a bonus is the company would inch me closer to knocking out two of my 2016 goals if I do decide to initiate a position.  With a low yield though, I will definitely want to initiate a position of at least $3,000.

Now onto the other question.  Is the company going to be considered an “Always Buy” stock going forward?   The company is getting strong consideration and a lot will depend on the dividend increase announced in July.  What attracts me is the strong brand recognition, the dominance in the industry, the long-term dividend history, and the long-term ability of the company to grow.  Heck, they have been around since 1843.  What’s not to love about that!   I don’t know what stock I would replace, so I would have to think a little more to determine if SWK should knock one of the other five off of the list.   The important thing is the analysis did not wow me to the point where my hand was forced and I had to add SWK to my “Always Buy” list.

Do you own Stanley Black and Decker?  What are your thoughts on the analysis?  Do you agree with my decision to watch the stock versus buy?  Or do you think I am placing two much reliance on Metrics #5 and #6 and would add a position to your portfolio?  Would you add this stock to your “Always Buy” list for me and replace one of the following: MMM, EMR, JNJ, PEP, or TGT?   Let me know your thoughts everyone!



6 thoughts on “Stanley Black & Decker, Inc. Stock Analysis (SWK)

  1. Hello Bert,
    Very good analysis of SWK. I’ve selected this company this year on my watch list 🙂
    I haven’t bought it yet, but I’m sure it’s a great addition to any dividend growth portfolio.
    As the economy strengthens, the housing construction and renovation industry is rising. This will obviously boost SWK sales in the US.

    • Thanks Mike! Glad to see we now have a fellow company on our watch list. It didn’t hit me until your comment about how much the company will benefit once the construction sector gets rolling. The more people buy/sell/repair, the more tools they buy, etc. In the long haul, I think it would be an awesome company to own. I just need to make sure I can get it for the right price at the right time.


  2. Hi Bert

    Good analysis. While SWK is not normally the type of company I like as they manufacture a product that one would think is easily copied, your analysis made me think about it. I live in South Africa and even here Black & Decker has been a household name as long as I can remember. I was trying to think what the moat on such a company would be, and I think when one is dealing with tools such as nail guns, saws, and drills, you want quality that you can trust, poor quality could cost you an eye or a finger.


    • Ross,

      Thank you very much. There are times where you cut costs and can sacrifice quality, and tools/machinery are not one of them haha It is interesting to hear about their presence abroad and how they are a household name worldwide. The brand and reliability are two huge contributors to their moat if you ask me. It is a household name for companies and consumers, which is a hard feat to achieve.

      Thanks for the comment! Looking forward to seeing you around.


  3. I agree it’s not screaming buy, but a few stock markets down days and maybe it will be. It’s not a stock I watch, but I will now. Thanks for sharing.

    • It is awfully hard to find some buys as you said. The market is giving us some though, so we can be thankful for that. Glad you are adding it to your watch list as well. Take care!


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