Stanley Black & Decker (SWK) has paid dividends for 140 consecutive years and increased its payout for the past 49 consecutive years.
Next year, Stanley Black & Decker will join the exclusive dividend kings list, which consists of companies that have raised their dividend for at least 50 straight years.
These businesses are rare and typically possess numerous competitive advantages. Stanley Black & Decker is no exception.
Let’s take a closer look at this impressive industrial business that offers dividend growth investors the potential for double-digit payout growth for many years to come.
Business Overview
Stanley Black & Decker was founded in 1843 and has grown into a diversified global provider of power and hand tools, products and services for various industrial applications, and security systems.
The company sells over 500,000 products including power drills, saws, toolboxes, wrenches, fasteners, measuring tools, compressors, nail guns, outdoor power equipment, sanders, lamps, mowers, vacuums, workbenches, polishers, grinders, cordless tools, air tools, and more.
Some of the company’s biggest brands are Stanley, DeWalt, Black+Decker, Porter Cable, Bostitch and the newly acquired Irwin, Lenox and Craftsman brands.
Stanley Black & Decker’s largest end markets by 2016 revenue are residential / repair / DIY (23%), new residential construction (18%), non-residential construction (18%), industrial / electronics (13%), automotive production (8%), and retail (4%).
By segment, Stanley Black & Decker generated 66% of its 2016 revenue from Tools & Storage, 18% from Security, and 16% from Industrial.
By geography, Stanley Black & Decker generated 52% of its 2016 revenue from the U.S., 23% from Europe, 16% from emerging markets, and 9% from the rest of the world.
Business Analysis
Stanley Black & Decker’s primary competitive advantages are its well-known brands, product innovation, global distribution channels and a strong management team.
Stanley Black & Decker’s brands and reputation for quality were established a long time ago. The company obtained the world’s first patent for a portable power tool in 1916 and has since amassed an unparalleled family of brands, products, and industry expertise.
Before going further, it’s worth mentioning that Stanley Works acquired Black & Decker in early 2010 to create the biggest toolmaker in the U.S. This deal combined the leader in consumer and industrial hand tools and security with the leader in power tools.
Today, Stanley Black & Decker has over 13,000 active global patents and introduces about 1,000 new tool products per year, including many of the “world’s first” each year. The company has noted that new products drive over 85% of its organic growth, and NPD Data recognized the company for receiving the 8th most patents in the world from 2010-2014.
In October 2016, the company made its biggest global product launch in its 170+ year history. The Dewalt Flexvolt battery system delivered over $100 million of revenue in its first four months on the market, underscoring the company’s success at launching new products.
Innovation is a clear driver for the business, and Stanley Black & Decker is able to leverage its brand equity into adjacent product categories for easy expansion. Most of its markets are extremely large and fragmented because they require so many different types of products (e.g. a home remodeling project could require saws, measuring tools, nail guns, vacuums, tools, drills, and more).
Stanley Black & Decker can develop or acquire new products where it has gaps and market them under its famous brands. The company invested over $6 billion in acquisitions since 2002 to advance its growth opportunities, and I expect more of the same to continue over the next decade as it continues consolidating its markets.
However, during 2013, Stanley Black & Decker placed a moratorium on acquisitions to focus on near-term priorities of operational improvement and deleveraging. The company succeeded in improving its operating model and organizational capacity as well as driving organic growth and profitability during this time.
Today, the company is back to being focused on growth, with acquisitions expected to consume about half of incremental cash flow and contribute $6 billion to $8 billion in incremental revenue, helping the firm get closer to its objective of roughly doubling in size over the next six years.
