Stanley Black & Decker's (NYSE:SWK) Shareholders Will Receive A Bigger Dividend Than Last Year
Stanley Black & Decker, Inc. (NYSE:SWK) has announced that it will be increasing its periodic dividend on the 20th of September to $0.80, which will be 1.3% higher than last year's comparable payment amount of $0.79. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.
View our latest analysis for Stanley Black & Decker
Stanley Black & Decker's Earnings Easily Cover the Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Stanley Black & Decker was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to rise by 58.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.
Stanley Black & Decker Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.64 in 2012 to the most recent total annual payment of $3.16. This means that it has been growing its distributions at 6.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Stanley Black & Decker's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Stanley Black & Decker is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Our Thoughts On Stanley Black & Decker's Dividend
Overall, we always like to see the dividend being raised, but we don't think Stanley Black & Decker will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Stanley Black & Decker is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Stanley Black & Decker (of which 1 shouldn't be ignored!) you should know about. Is Stanley Black & Decker not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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