If you are trying to find a dividend stock or two that can keep paying you even during tough economic times, then you should do a deep dive on Stanley Black & Decker (SWK 1.56%) and TotalEnergies (TTE 0.52%). The two companies operate in vastly different industries and they are performing dramatically differently right now. However, both have unique factors that should make them of interest to long-term dividend investors.
Here's a quick look at these two dividend stocks.
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1. Stanley Black & Decker: Another bad year
Industrial Stanley Black & Decker entered 2022 thinking it would be a good year. But by the end, adjusted earnings had fallen by 55%. It shouldn't be too shocking that the stock price fell roughly 60% in 2022. Stanley Black & Decker expects 2023 financial results to be even worse, with earnings falling again.
Why would anyone want to own this company? For starters, the tools it makes are really necessity items, since construction would be impossible without them. Second, management is executing on a plan to right the ship that includes cost-cutting, product innovation, and debt reduction, among other things. Some of these efforts necessitate more near-term pain but will help ensure the company's long-term success. Third, Stanley Black & Decker has paid a dividend every year for 146 consecutive years. Management has also stated that sustaining the dividend through the current rough patch is of particular importance.
Given that the last 146 years include both the Great Recession and the Depression, it's probably worth giving management the benefit of the doubt here. Meanwhile, you can collect a historically high 3.6% dividend yield while you await better days.
2. TotalEnergies: Charting a different course
In 2020, international energy giant TotalEnergies announced that it would be working to increase its exposure to clean energy, a promise it has been living up to. It wasn't alone, either -- peers BP and Shell both made similar announcements. But there has been a huge difference. Shell and BP both cut their dividends at about the same time they pivoted toward clean energy. TotalEnergies pledged to support its dividend.
It was a tough year in the energy patch in 2020, with countries around the world effectively shutting their economies in an effort to slow the spread of the coronavirus. So dividend cuts helped to free up cash flow for BP and Shell, but investors who were relying on those payments might have been blindsided. TotalEnergies clearly took a more balanced approach, though it should be noted that ExxonMobil and Chevron both protected their dividends as well. But those two U.S. giants have chosen to stay the course and continue to focus primarily on oil and natural gas. Only TotalEnergies is trying to take a middle road here, and so far succeeding.
The most interesting thing is that investors don't appear to appreciate TotalEnergies' approach. The nearly 4.7% dividend yield is at the high end of its closest peers. There are tax issues to consider, as U.S. investors have to pay French taxes on the dividend. But even taking that into account, TotalEnergies' efforts to grow both its carbon fuels business and its clean energy business seem more attuned to the world's needs today. In fact, BP recently stepped back its clean energy commitment as oil demand rebounded strongly from its 2020 lows.
Energy prices will always be volatile, so TotalEnergies stock will rise and fall over time. However, if you want to own a company that has a reasonable plan to address the issues it faces today and the ones it will likely face in the future, this energy stock looks like it has a business approach that's better than those of its peers.
Dividends for the long term
Investors looking for reliable dividend stocks should consider a company's business perspective before they look at its yield. Only strong businesses can support dividends over the long haul. Stanley Black & Decker has proven it has the wherewithal to pay through thick and thin, which makes today's hard times a potentially interesting entry point. TotalEnergies is operating in a sector that's been performing well, but it is already preparing for a time when oil and natural gas aren't the only game in town. And it is dedicated to protecting dividend investors through the industry's transition. Both of these stocks look like desirable long-term dividend stocks today.
