Should You Buy the Dip in These 2 Dividend Kings?

Dividend Kings are the rare royalty of the stock market - companies with the muscle to grow their dividend payouts for at least 50 consecutive years. Known for rock-solid financial stability, steady cash flow, and a dedication to shareholder returns, they are prized by investors seeking long-term security.

Sysco Corporation (SYY), the food distribution giant, and Stanley Black & Decker, Inc. (SWK), renowned for its iconic tools and hardware, are two such Dividend Kings that have steadily rewarded shareholders for over five decades. Plus, they boast forward dividend yields that comfortably outshine the SPDR S&P 500 ETF Trust’s (SPY) 1.2% yield.

But last week, both giants stumbled after their latest quarterly earnings reports, with shares of each sliding off their YTD highs. However, these dividend stocks have Wall Street analysts on their side, and bullish price forecasts suggesting more upside in store.

Now that these Dividend Kings are trading at more attractive valuations, here’s a closer look for investors considering picking up these stocks on the dip.

Dividend King #1: Sysco Corporation

Houston-based Sysco Corporation (SYY), valued at around $37.5 billion by market cap, is the culinary giant behind countless meals served away from home. This global leader in food distribution caters to restaurants, schools, hospitals, and hotels, delivering everything from staples to gourmet delights. With an impressive network of distribution centers, Sysco’s extensive supply chain and logistics ensure that chefs and food enthusiasts have access to high-quality ingredients.

SYY stock has climbed 5.3% on a YTD basis, rallying 15.3% over the past year to lag the broader market. Shares of this food service giant are currently trading about 7% below their February high of $82.89.

On Oct. 25, Sysco paid a quarterly dividend of $0.51 per share, which translates to an annualized dividend of $2.04 per share, yielding a steady 2.67% for investors seeking reliable income. Backed by a 54-year legacy of consistent dividend growth, Sysco’s 46.1% payout ratio signals a sustainable approach, balancing shareholder rewards with growth initiatives.

Adding to Sysco's appeal is its current valuation. SYY stock is priced at 16.71 times forward earnings and 0.47 times sales, representing a discount to the consumer defensive sector median and its own five-year average valuation.

So, with Sysco’s dependable dividends and a valuation that makes it look like a bargain, SYY offers both stability and upside, fitting the bill for those seeking income and growth.

In Sysco’s fiscal Q1 2025 earnings report, the company posted $20.5 billion in revenue - a 4.4% year-over-year jump that slightly beat Wall Street’s expectations. Adjusted EPS landed at $1.09, up 1.9% year over year, but shy of analysts’ projections by 3.5%.

The international market drove much of this growth, with the segment’s adjusted operating income surging 12.1% annually. Specialty divisions gained ground, and Sysco’s “total team” approach maintained momentum in a competitive landscape.

Sysco is steadily bolstering its cash position, ending Q1 with $733 million and improving free cash flow by $81 million year-over-year. During the quarter, Sysco returned $359 million to shareholders through dividends worth $251 million and share repurchases totaling $108 million.

Management is eyeing stronger local volume growth and margin improvements in the second half, supported by a solid pipeline. A strengthened exit rate in September and robust investments reaffirm Sysco’s fiscal 2025 guidance of 4% to 5% sales growth and 6% to 7% adjusted EPS growth. Additionally, for fiscal 2025, Sysco is set to return around $2 billion to shareholders, keeping them well-fed on returns.

Analysts tracking Sysco expect the company’s profit to increase 6% year over year to $4.57 per share in fiscal 2025 and jump another 8.1% to $4.94 per share in fiscal 2026.

On Wall Street, SYY stock has a consensus “Strong Buy” rating overall. Out of the 15 analysts offering recommendations, 11 suggest a “Strong Buy,” and the remaining four maintain a “Hold” rating.

The average analyst price target of $85.17 indicates expected potential upside of 10.6% from the current price levels. 

Dividend King #2: Stanley Black & Decker  

Headquartered in Connecticut, Stanley Black & Decker, Inc. (SWK) is a global leader in tools and outdoor products, with manufacturing facilities worldwide. With iconic brands like DeWalt and Craftsman under its belt, Stanley Black & Decker has a market cap of $14.9 billion.

Stanley Black & Decker kicked off 2024 on a rough note, with shares dropping nearly 19% in the first half. After a pandemic-fueled DIY boom, the toolmaker stumbled as lockdowns lifted, grappling with tough sales comparisons and rising costs from ongoing supply chain issues. 

More recently, shares of Stanley Black & Decker shares plunged 8.8% in a single day following the release of disappointing fiscal Q3 earnings on Tuesday, Oct. 29, and guidance that missed Wall Street’s expectations. SWK has slid 17% from its September peak of $110.88, and is down 6.2% on a YTD basis.

Stanley Black & Decker has increased its dividends for 56 straight years, and currently pays a quarterly dividend of $0.82 per share, bringing its annualized payout to $3.28 and offering a solid 3.39% yield.

From a valuation standpoint, SWK is trading at just 0.98 times forward sales. This figure is below the sector median and its own five-year average, suggesting the stock is priced at a discount.

On Oct. 29, the tool company released its fiscal 2024 Q3 earnings results, with net sales of $3.8 billion down 5.1% year-over-year, missing Wall Street’s expectations amid slower consumer demand and a softer auto sector.

SWK’s adjusted EPS rose 16.9% annually to $1.22, beating expectations by 18.5%. Cash flows also held strong, generating $286 million from operations and $200 million in FCF, which went toward trimming $100 million in debt and helped shore up dividends for shareholders.

Management narrowed its full-year EPS outlook, raising the low end but also lowering the top end of its guidance to call for $3.90 to $4.30, on an adjusted basis. SWK backed its guidance for FCF in the range of $650 million to $850 million.

Analysts tracking Stanley Black & Decker expect the company’s profit to surge 184.1% in fiscal 2024 to $4.12, and rise another 32.5% year over year to $5.46 per share in fiscal 2025.

Overall, Wall Street is cautious, with a consensus “Hold” rating for SWK stock. Of the 15 analysts in coverage, four advise a “Strong Buy,” nine suggest a “Hold,” and the remaining two recommend a “Strong Sell.”

The average analyst price target of $104 indicates expected upside potential of about 13%.

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On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.