Since this stock absorbed its main rival in a big merger eight years ago, it has continued to grow by acquisition.
In the past two years alone, the company made four acquisitions. While this strategy adds risk, the firm has a history of successfully integrating new businesses and making them more profitable. It expects its revenue to grow by $22 billion over the next four years, so it is likely to make further acquisitions. In the meantime, the company has paid dividends continuously for almost a century and a half, and increased its payout for 51 straight years.
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STANLEY BLACK & DECKER INC. (New York symbol SWK; www.stanleyblackanddecker.com) is one of the world’s largest makers of hand and power tools for consumers. In addition to Stanley and Black & Decker, its top-selling brands include DeWalt, Craftsman and Irwin.
Tools and storage products accounted for 70% of Stanley’s 2017 sales and 72% of its profits. That’s followed by Industrial products (15% of sales, 17% of profit) and building security systems (15%, 11%).
The company’s overall sales rose 4.1%, from $10.9 billion in 2013 to $11.3 billion in 2014. Overseas markets account for about half of Stanley’s sales, and due to the negative impact of currency rates, its total revenue slipped to $11.2 billion in 2015. However, sales rebounded to $11.4 billion in 2016, and rose again to $12.7 billion in 2017.
Total earnings surged 135.8%, from $520 million in 2012 to $1.2 billion in 2017. Stanley is an aggressive buyer of its own shares. As a result of fewer shares outstanding, per-share profits jumped 145.1%, from $3.28 to $8.04.
The higher sales and earnings are largely due to acquisitions. Since 2002, the company has spent $8.9 billion to buy related firms. That’s on top of its $4.5 billion all-stock purchase of rival toolmaker Black & Decker in March 2010.
Growth Stocks: Company has paid dividends continuously for 142 years
In March 2017, Stanley completed two major acquisitions: it bought the Craftsman hand and power tools business from Sears Holdings Corp. (Nasdaq symbol SHLD), and the hand-tool businesses (Lenox and Irwin) of Newell Brands (New York symbol NWL).
In April 2018, the company purchased the industrial business of Nelson Fastener Systems for $435 million. That operation makes welding equipment for construction and industrial customers.
In September 2018 Stanley agreed to pay $234 million for a 20% stake in MTD Products Inc. That privately held firm makes outdoor power equipment such as lawn mowers and snow blowers. Stanley has an option to buy the remaining 80% by July 1, 2021.
Expanding by acquisition adds risk. However, the company has a strong history of successfully absorbing new businesses and improving their profitability.
Stanley aims to increase its annual revenue to $22 billion by 2022, so it will probably continue to make acquisitions. The company has a strong history of absorbing new operations, which helps cut the risk of using those purchases to expand.
Its balance sheet is also strong. Stanley’s long-term debt as of September 29, 2018, was $2.8 billion, or just 15% of its market cap. It also held cash of $368.7 million.
The company expects cutting jobs and closing some plants at its new businesses will boost its 2018 earnings per share by $0.50. The recent changes to the U.S. tax code will add a further $0.20 a share.
Overall, earnings will probably increase 4.5%, from $8.04 a share in 2017 to $8.40 in 2018. Stanley trades at a moderate 14.2 times that forecast.
Stanley raised its quarterly dividend by 4.8% starting with the September 2018 payment. Investors now receive $0.66 a share instead of $0.63. The new annual rate of $2.64 yields 2.3%. The company has paid dividends continuously for 142 years and has raised the annual rate each year for the past 51 years.
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