In times of uncertainty, astute dividend investors with a long-term mindset may find themselves presented with unique opportunities. Two companies currently facing challenges but with promising dividend prospects are Stanley Black & Decker and IFF (formerly International Flavors & Fragrances).
Despite short-term headwinds, both companies have a track record of dividend growth and are taking strategic measures to weather the storm. This article explores the potential for dividend investors to capitalize on these undervalued stocks and benefit from their resilient dividend histories.
Stanley Black & Decker:
Stanley Black & Decker is an industrial heavyweight with an impressive record of over five decades of annual dividend increases, earning the coveted status of a Dividend King. The company's focus on manufacturing essential tools underscores its indispensability in various sectors. While 2023 presents a challenging year, with projected adjusted earnings decline, the underlying factors contributing to this situation are complex.
Recent acquisitions and the resultant debt burden, supply chain disruptions due to the pandemic, and the need to clear excess inventory have all played a part.
Management is diligently addressing these issues through cost-cutting measures, including plant closures and product streamlining. Though these actions come with near-term costs, they pave the way for future efficiency and improved profitability. Importantly, Stanley Black & Decker's commitment to preserving its dividend has remained steadfast.
With the stock trading at a 60% discount from its 2021 peak and offering an attractive dividend yield of approximately 4%, forward-thinking investors may find this an opportune moment to consider this Dividend King before the market recognizes its turnaround potential.
Tips for Investors
- Consider Stanley Black & Decker if you are looking for a Dividend King with a long history of dividend growth and a strong track record of weathering storms.
- Be aware that the company is facing some short-term challenges, but management is taking steps to address them.
- The stock is currently trading at a significant discount from its 2021 peak, offering an attractive dividend yield.
Investors with a long-term horizon may find this an opportune time to buy Stanley Black & Decker.
IFF:
IFF, a renowned manufacturer of flavors and fragrances, has also confronted challenges stemming from the pandemic. The supply chain disruptions necessitated increased inventory levels, leading to reduced demand for its products.
Similar to Stanley Black & Decker, IFF embarked on a strategic path to alleviate its debt burden through asset sales, implement cost-cutting measures, and adjust production levels to tackle excess inventory. Despite short-term profitability setbacks, the company maintains an optimistic outlook for the future, anticipating sales volumes to rebound as supply chain disruptions ease.
Emphasizing their commitment to dividends, IFF intends to support its historically high dividend yield of 3.6% and sustain its remarkable track record of annual dividend increases.
Currently trading approximately 45% below its previous high-water mark, IFF presents a compelling opportunity for long-term investors seeking value amidst uncertainty.
Tips for Investors
- Consider IFF if you are looking for a company with a strong track record of dividend growth and a positive outlook for the future.
- Be aware that the company is facing some short-term challenges, but management is taking steps to address them.
- The stock is currently trading at a significant discount from its 2021 peak, offering an attractive dividend yield.
- Investors with a long-term horizon may find this an opportune time to buy IFF.
Conclusion
Stanley Black & Decker and IFF, though facing near-term challenges, offer intriguing prospects for dividend investors with a penchant for contrarian investments and a long-term perspective. These resilient companies have weathered storms in the past, demonstrating their ability to bounce back.
Investors should closely monitor their ongoing turnaround efforts, which appear to be progressing as anticipated. With attractive dividend yields and a commitment to dividend growth, both companies exemplify the potential for value creation in the face of adversity.
As always, investors should conduct thorough research and consider their own financial goals and risk tolerance before making any investment decisions. By embracing uncertainty and staying attuned to these dividend growers, investors may uncover hidden gems that can reward them in the long run.
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