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How Attractive Is Stanley Black & Decker’s Dividend Yield?


Aug. 23 2017, Published 11:17 a.m. ET

Stanley Black & Decker’s dividend yield

The dividend yield is one of the major attributes that long-term investors look at before investing in a stock. A dividend yield is the return that investors get for every dollar invested in a company’s equity.

With Stanley Black & Decker increasing its quarterly dividend from $0.58 to $0.63 per share, we can expect SWK to pay a dividend of $2.42 per share for fiscal 2017. As of August 22, 2017, SWK’s current dividend yield stands at 1.74%. In the past five years, SWK’s dividend yield has been on a downward trend despite dividend growth every year. However, at the same time, SWK’s stock price has more than doubled during the same period, indicating that SWK’s dividend growth was slower than the growth in its stock price.

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3M (MMM), General Electric (GE), and Honeywell (HON) have dividend yields of 2.3%, 3.9%, 2.0%, respectively, which are all better than SWK’s dividend yield. However, SWK’s dividend yield is still better than the yield from the one-year Treasury notes. If the downward trend continues, SWK might have to raise its dividend significantly to maintain a good dividend yield and to keep long-term investors happy.

Dividend payouts

At the end of 2Q17, SWK’s dividend payout stood at 26.3%. For fiscal 2017, assuming a dividend rate of $2.42 per share and earnings per share of $7.30, the payout rate would be at 33.2%. These estimates suggest the downward trend in the company’s dividend payouts could continue. SWK’s dividend payout in 2012 was at 38.1%, and it fell to 34.7% in fiscal 2017.

For indirect exposure to SWK, investors can invest in the iShares Morningstar Mid-Cap ETF (JKG), which invests 1.2% of its portfolio in SWK as of August 22, 2017.

In the next part, we’ll look at analysts’ recommendations for SWK.


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