When it comes to investing, some of the sharpest minds in the business, Warren Buffett among them, agree on one thing: Boring is beautiful.
In the past decade, Stanley shares have more than doubled theS&P 500, gaining more than 130%, not including dividends. They were down slightly in early afternoon trading on Monday.
Based in New Britain, Conn., and boasting a market capitalization of $17.8 billion, Stanley stands astride the global tool market. Take a stroll through the tool aisle at your local Home Depot or Lowe's, and you'll find its brands --Stanley, Black and Decker, DeWalt and Bostitch, among others -- dominating the shelves.
Stanley's tools and storage business supplies about two-thirds of its revenue. The rest comes from security products, including locks and gates, and industrial offerings, such as fasteners and gear and services for pipeline construction.
Where your average "exciting" Silicon Valley upstart counts its lifespan in months, Stanley's existence extends more than a century: It's been around since 1843, though it took its current form in 2010, when Black and Decker merged with The Stanley Works.
Fast-forward seven years, and the company still leans heavily on acquisitions for growth. It made a savvy move last week, snapping up the 90-year-old Craftsman brand from strugglingSears Holdings (SHLD) , and it appears to have gotten a bargain, to boot.
Under the deal, Stanley will pay Sears $525 million in cash when it closes the purchase later this year and another $250 million at the end of year three. Sears will also get a cut of new Craftsman sales for the first 15 years, bringing the deal's total value to around $900 million.
That's much lower than the $2 billion figure circulated in early October, when rumors of a sale started brewing. Stanley sees Craftsman tacking $0.10 to $0.15 a share onto its earnings in year one and rising to $0.70 to $0.80 by year 10, excluding related costs.
The move also follows Stanley's $2-billion purchase of the hand and power tool business of Newell Brands, which will hand it control of the well-known Irwin and Lenox banners when that deal closes in the first half of the year.
With Craftsman, Stanley gets a brand that controls 28.5% of the U.S. hand-tool market but has little reach beyond Sears's stores. Right now, just 10% of Craftsman tools are sold outside the beleaguered chain, giving Stanley a golden opportunity to get them onto more retailers' shelves.
These latest deals come as the economy provides a tailwind: House prices are rising with the average U.S. domicile's value jumping 5.6% in October from a year ago; job creation remains strong; and wage growth finally appears to be waking from its slumber. In December, the average paycheck swelled by 2.9% from a year earlier, the biggest rise in more than seven years.
The analyst community is also optimistic, with the average 12-month price target on the stock sitting at $128.50, which would represent a gain of about 9% from today's level. Yet the stock trades at 18.2 times forward earnings, a discount to its industry, at 20.3.
Which brings us to the dividend. Stanley yields 2% today, but its dividend history is tough to beat: The company has made a regular payout for 139 straight years and has hiked its quarterly dividend for the last 48.
So don't overlook this toolmaker because it lacks flash. It's quietly laying the foundation for many more years of steady gains and rising income.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.