Stanley Black & Decker: After A Really Bad Quarter Is the Stock A Buy Or Value Trap?


Warren Buffett once famously suggested that investors should be “greedy when others are fearful and fearful when others are greedy.” After a disastrous quarter Dividend King Stanley Black & Decker with a 55 year and running dividend increase streak has fallen precipitously. In April of this year I produced a video titled “Stanley Black & Decker A Dividend Aristocrat On Sale”, (see link below) and I stand by that video based on the information available at the time. However, things change, and after reporting earnings on July 28 things appear to have changed dramatically for this Dividend King.

As a result, the critical question is whether this is a temporary interruption in a great business or a permanent impairment. Put another way, has Stanley Black & Decker now become an incredible long-term opportunity or are we now looking at a value trap? I think the answer depends on your time horizon. In other words, I do not think investors could prudently expect immediate gratification from investing in Stanley Black & Decker today. On the other hand, if you are looking to the future, as I believe investors should, that this could be a rare opportunity to invest in a quality dividend growth stock at an attractive valuation.

Stanley Black & Decker FAST Graph
Stanley Black & Decker FAST Graphs

I believe this is important, because I also believe that you make your money on the buy side. Our economy has clearly entered a recession. Industrial stocks like Stanley Black & Decker have historically suffered during the recessionary periods. On the other hand, once the economy recovers, the company has a long history of recovering as well. The one thing that I like most about this company and its management team is their long-term commitment to rewarding shareholders through dividends and currently share buybacks. In my opinion, this management team is keenly aware of the importance of their dividend streak. Therefore, I believe if it is at all possible, this company will maintain its incredible dividend growth streak. Nevertheless, as always, I suggest each investor conduct their own research and due diligence and decide according to their own goals, objectives and risk tolerances.