The S&P 500 index (^GSPC +1.18%) is not for the faint of heart today, trading near all-time highs even as the world faces material economic and geopolitical headwinds. The stocks of high-yield Stanley Black & Decker (SWK +1.82%) and United Parcel Service (UPS 0.12%), by contrast, have each fallen dramatically over the past five years. They are turnaround stories that are paying you well to wait for business upturns.
Here's why you may want to buy Stanley Black & Decker and UPS today and hold on for decades. Notably, one is a Dividend King that has continued to hike its dividend despite the business headwinds it has faced.
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Stanley Black & Decker is starting to see material progress
Under previous leadership, Stanley Black & Decker went on an aggressive acquisition spree. This bulked up the company's tools business, adding well-recognized and respected brands to the portfolio and expanding the company into new areas. However, it also left the company with a heavy debt load and bloated costs, both of which needed to be addressed.
To do that, the company has been selling non-core assets and streamlining its business. It has not been a quick or easy process, with adjusted gross margin dropping to 22.1% in the second half of 2022. Net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was 5.9X at the end of 2023. However, the company's efforts have been working, with adjusted gross margin expected to fall between 33% and 34% in the second half of 2026 and net debt to adjusted EBITDA down to 2.5x by the end of the year.
NYSE: SWK
Key Data Points
Through it all, this Dividend King has continued to add to its over 50-year-long dividend streak. Despite material turnaround progress, the stock is still down 60% over the past five years, and trades with a historically high yield of 4.1%. This industrial tool company doesn't appear to be getting the credit it deserves, which could make it a solid long-term hold for investors who think in decades.
United Parcel Service's business is about to turn
UPS isn't a Dividend King, but this industrial giant's dividend has generally trended higher since its initial public offering in late 1999. The yield is a historically high 6.1% today. Management has basically stated that the goal is to hold the dividend steady in 2026. That's important because management also believes that its turnaround will hit an inflection point in the second half of the year.
The company is one of the largest package delivery companies in the world. It provides a vital, complex service that would be hard to replicate. However, it is also one that requires material capital investment. After getting a bit bloated, UPS has been streamlining, selling non-core assets, upgrading technology, and shifting toward more profitable business. It has not been an easy process, but the company is showing progress. Notably, its revenue per piece in the U.S. market is rising despite lower revenues. Smaller and more profitable is the long-term goal, so this is a good sign.
NYSE: UPS
Key Data Points
If you buy the stock now, you can get in ahead of the expected inflection point in the second half of the year. And you can hold on for the long term, collecting a lofty yield, as the company benefits from increased demand for package deliver in the digital age.
Not for the faint of heart, but attractive nonetheless
To be fair, neither UPS nor Stanley Black & Decker will likely interest risk-averse dividend investors. However, with the S&P 500 index offering a tiny 1.1% yield and trading near all-time highs, it isn't exactly an attractive dividend option, either. If you can handle a little uncertainty, high-yielding UPS and Stanley Black & Decker are doing what they said they would do and paying you well to wait for the market to catch on to the turnaround success they are achieving.
