We recently published a list of 15 Dividend Zombies to Invest in. In this article, we are going to take a look at where Stanley Black & Decker, Inc. (NYSE:SWK) stands against other dividend zombies to invest in.
The broader market has posted consecutive annual gains of 25%, largely fueled by growth stocks and companies capitalizing on the rising demand for artificial intelligence. Despite this, dividend stocks remain a key part of a strong investment strategy. Over time, dividends play an increasingly significant role in returns, and historical data shows that from 1987 through the end of 2023, reinvested dividends accounted for roughly 55% of the market’s total gains.
While recent market gains have largely been driven by a few non-dividend-paying companies, the landscape is evolving. Several major tech firms introduced dividend policies last year, emphasizing their commitment to returning capital to shareholders. They view dividends as a valuable complement to share buybacks. Although initial dividend yields from tech stocks remain modest, the total payout is substantial, with just three companies expected to distribute an estimated $17 billion over the next year, as reported by J.P. Morgan.
This shift sends a significant signal to the market. The report highlighted that the best opportunities in dividend stocks come from “Compounders”—companies with a strong history of consistently increasing dividends. Nearly half of the strategy focuses on these firms, which are supported by steady earnings growth. Compounders not only ensure reliable income but also provide a solid foundation for generating long-term portfolio outperformance.
Dividend zombies are a lesser-known category within dividend investing. These companies have consistently paid dividends to shareholders for 100 years or more. Some have even increased their payouts over time, earning a place among the elite dividend aristocrats. Their ability to sustain such a long track record is largely due to strong cash flows and solid financial health. This strong financial position makes these stocks appealing to investors.
According to a report by Nuveen, dividend growth stocks have historically delivered a strong mix of earnings expansion, cash flow stability, and well-managed dividend policies. They have demonstrated solid performance in rising markets while also offering resilience during downturns and periods of market volatility. Over time, companies that consistently increase or initiate dividends have outperformed those that merely maintain payouts, do not pay dividends, or reduce them. In addition, they have achieved these returns with lower risk, as reflected in their lower standard deviation.
Dividend stocks are also appealing today from a valuation perspective. The market’s heavy concentration in a few stocks and the excitement around AI have led to historically low relative valuations for dividend-paying companies. This creates an opportunity for investors to tap into a long-term trend that combines income generation with growth by investing in businesses with solid fundamentals and a track record of steady dividend increases. Historically, this segment has provided downside protection, making it a strategic option for adding stability and diversification to an equity portfolio.
Our Methodology
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. The stocks are ranked in ascending order of the consecutive years of dividend payments.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Stanley Black & Decker, Inc. (NYSE:SWK)
Consecutive Years of Dividend Payments: 148
Stanley Black & Decker, Inc. (NYSE:SWK) is an American manufacturing company, headquartered in Connecticut. The company specializes in industrial tools, household hardware, and security products. As economic conditions deteriorate, consumers are looking for ways to reduce expenses, often by postponing repairs, maintenance, and home improvement projects. In response, the company is focusing on cost-cutting measures, improving profit margins, and lowering its debt burden—efforts that could make it more appealing to cautious investors. By the end of the year, the company’s long-term debt stood at $5.6 billion.
In the fourth quarter of 2024, Stanley Black & Decker, Inc. (NYSE:SWK) reported revenue of $3.7 billion, which remained flat as compared to the same period last year. Amid a mixed macroeconomic environment, the company remains optimistic about the growth and market share gains achieved by DEWALT and certain segments of engineered fastening. As it progresses, the company takes pride in meeting key financial milestones, including an adjusted gross margin surpassing 31% in the fourth quarter and strong cash flow generation.
Stanley Black & Decker, Inc. (NYSE:SWK) generated an operating cash flow of $679 million in Q4 2024 and its free cash flow for the period came in at $565 million. This cash position allowed the company to reduce its debt by $1.1 billion at the end of the year. Moreover, it has paid dividends for 148 years while maintaining a dividend growth streak of 158 years. The company’s per-share dividend comes in at $0.82 every quarter and has a dividend yield of 4.12%, as of March 23.
Overall, SWK ranks 2nd on our list of dividend zombies to invest in. While we acknowledge the potential of SWK as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than SWK but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.