For investors seeking income from their portfolios, a stock that qualifies as a Dividend Aristocrat automatically gets their attention. Stanley Black & Decker (NYSE:SWK) is just one example, having easily eclipsed the 25-year minimum track record of annual dividend increases that Aristocrats have to post.

Yet even with its impressive 46-year dividend-hike streak, Stanley Black & Decker recently did something with its payout that raised some investors' eyebrows: it slowed the pace of its dividend growth. Although any increase is sufficient to keep a dividend streak technically alive, smaller payout boosts can sometimes signal challenges that investors need to pay attention to. Let's take a closer look at Stanley Black & Decker to see whether it's likely to be able to sustain or even improve on its dividend growth.

Dividend Stats on Stanley Black & Decker

Current Quarterly Dividend Per Share


Current Yield


Number of Consecutive Years With Dividend Increases

46 years

Payout Ratio


Last Increase

September 2013

Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Why Stanley investors are still smiling
Even for dividend investors, total returns are still important, and Stanley Black & Decker has rewarded shareholders as its stock has soared to new all-time highs. As the largest power-tool and hand-tool maker in the world, the company has used the strategy of aggressively acquiring tool brands to build out its offerings and boost market share. With a substantial amount of its demand coming from residential and commercial construction, the recent recovery in the U.S. housing market has raised investors' expectations about Stanley's future growth prospects. Analysts now see Stanley growing its earnings at a better than 15% pace both this year and next, helping fuel excitement about the stock.

Yet the big question going forward is whether the pace of those gains can continue. Rising interest rates haven't caused Stanley's shares to buckle, but investors have seen signs of the possible impact of slower housing growth at some of the retailers that sell its products. Home Depot (NYSE:HD) in particular has seen its stock retreat as much as 10% from its recent highs as higher rates work their way through the residential mortgage market. So far, higher financing costs haven't made big changes in home-buyers' behavior, but the longer-term effects could reverse gains that the retailer has seen in past years. That in turn could threaten Stanley's growth prospects.

Still, competition hasn't been as big a threat as one might have expected. Sears Holdings (NASDAQ:SHLD), which is the company behind the popular Craftsman brand of tools, spun off its Sears Hometown and Outlet Stores (NASDAQ:SHOS) unit late last year. The reshuffling included many local hardware stores that focused on tools and equipment, and some Sears investors hoped that the move would boost interest in both companies based largely in part on greater emphasis on the Craftsman brand. Yet despite strong initial success, Sears Hometown shares have retreated close to their initial price, and the status of Sears Holdings more broadly remains in doubt despite its maintaining a resilient share price in 2013.

SWK Dividend Chart

Stanley Dividend data by YCharts.

With all this good news, the decision from Stanley back in July announcing a dividend increase of just a penny per share seems out of place. Boosts of around 20% in each of the past two years seemed sustainable in light of Stanley's earnings growth, and with a payout ratio well below 50%, it's hard to argue that the company doesn't have the ability make larger dividend distributions.

When will Stanley Black & Decker boost its payout?
The one interesting possibility is that Stanley Black & Decker might raise its dividend again sooner than this time next year. Back in late 2010, the company made a token $0.01 per share increase, only to come back at the beginning of 2011 with a more dramatic boost of more than 20%. A similar pattern here could make investors feel a lot happier about Stanley's dividend prospects going forward.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Home Depot. The Motley Fool owns shares of Sears Hometown and Outlet Stores. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.