Wall Street Is Sleeping on This Dividend King Industrial Stock, and That's Your Opportunity

Shares of Stanley Black & Decker (NYSE: SWK) have lost roughly two-thirds of their value since peaking in 2021. The stock has been largely ignored by Wall Street for years. But you shouldn't sleep on the business reset that the company has been working on, even though new headwinds have cropped up.

Stanley Black & Decker made too many deals, too quickly

Stanley Black & Decker's big problem was a debt-fueled acquisition spree, which expanded the company's brand portfolio. Although it cemented its position as a dominant force in the tool business, it left behind a bloated, inefficient operation overburdened by debt. The company has been working hard to slim down, increase efficiency, and reduce leverage. That process is, in fact, largely complete.

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The sale of non-core assets has helped reduce net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from 5.1x in 2023 to a projected 2.5x by the end of 2026 (following the sale of another division). Meanwhile, the industrial company's gross margin has improved from 22.1% in the second half of 2022 to 32.5% in the second half of 2025. Management believes it can improve gross margin to as high as 35% in the second half of 2026.

The company is a Dividend King, with over five decades of annual dividend increases behind it. Some investors feared that streak would end because of the turnaround, noting that the company's earnings fell deep into negative territory during it. The payout ratio has been troubling for several years, and even the cash dividend payout ratio, which is often viewed as a more accurate gauge of dividend-paying ability, got a little high. However, with the portfolio now slimmed down, the cash dividend payout ratio is hovering around 70%. This suggests the dividend, and the attractive 4.4% dividend yield it backs, is safe.

Stanley Black & Decker can't catch a break

Essentially, a lot of hard work has been completed in Stanley Black & Decker's turnaround effort. But new headwinds seem to keep cropping up. Right now, tariffs and inflation are the headline-grabbing problems, with a recession an entirely possible outcome in 2026. The company's business is more consumer-facing than most industrial companies, given that it counts hardware stores as key customers. There's little management can do about the new headwinds other than muddle through, which is what the company is doing. However, after such a long turnaround, investors seem to have adopted a "show-me" attitude toward the stock.

That's understandable given the magnitude of the business overhaul. But it may be ignoring the huge amount of work that has been done so far. And the fact that Stanley Black & Decker is far better positioned as a business today than it was just a couple of years ago. For example, after years of weak payout ratios, the company's 2026 earnings guidance of $4.15 to $5.35 per share will more than cover the $3.32 in dividends per share it will pay based on the current quarterly payment.

Don't sleep through this opportunity

If you can handle some near-term uncertainty, Stanley Black & Decker looks like it has gone from a high-risk turnaround story to a fairly low-risk one. And you are getting paid very well to wait for this Dividend King to work through yet another set of headwinds, something it has done many times over the past 50 years, not to mention in just the last five years.

Reuben Gregg Brewer has positions in Stanley Black & Decker. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.