worst performing Dividend Kings 2022

3 Worst Performing Dividend Kings in 2022

The bottom line was the year 2022 proved challenging to navigate for investors. That said, the dividend growth investing strategy performed relatively well. This article discusses the three worst performing Dividend Kings in 2022 which are Stanley Black & Decker, Target, and 3M Company.

The year 2022 is a letdown after two excellent years of total returns driven by the COVID-19 pandemic. Although the pandemic’s economic effect is arguably fading in the United States, its long-term impact on supply chains and the labor force is indisputable. The consequence was the highest inflation in four decades and rising interest rates. As investors know, inflation is bad for stock markets because it impacts profits and lowers returns.

Beyond inflation and interest rates, other factors have made 2022 a challenging year. The Russo-Ukrainian War stoked inflation and made oil, grain, and vegetable oil prices sky-high. In addition, China still needs to solve its COVID-19 problem because of less effective vaccines and poor policies. The consequence has been reduced economic output and global supply chain disruptions.


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Market Overview

Tech and riskier growth stocks ended their two years of outperformance with a thud. The combination of high inflation, draining of liquidity from the financial markets, and rising interest rates dampened investors’ interest in tech and riskier stocks. Only the Energy sector performed well with a positive return because of soaring oil and natural gas prices. However, the end of 2022 saw lower prices. Thus, Energy sector stock prices declined.

The tech-heavy NASDAQ-100 had a horrible year and has plunged (-32.2%) year-to-date (YTD) as of December 28, 2022. The Index is in a bear market as investors eschew risk. This performance is much worse than 2020 and 2021, two excellent years for total returns.

The Dow Jones Industrial Average (DJIA) had the best year of all the major indices, but it is still down in 2022. The Dow 30 is down roughly 8.5% YTD, better than the Nasdaq and S&P 500 Index. Stocks in the Energy, Consumer Defensive, and Healthcare sectors are helping the Dow outperform. 

The S&P 500 Index also struggled with a (-18.3%) total return in 2022, placing it in a market correction. Mega-cap tech stocks that led in 2020 and 2021 struggled all year, but previously, out-of-favor sectors and stocks came to the forefront. For example, both Exxon Mobil (XOM) and Chevron (CVX) performed well. The Index’s poor return has caused retirement portfolios to do poorly.

The 2022 Dividend Kings had a better year than most indices, but they were still down. This year the Dividend Kings are down about 3.6% with dividends reinvested, as seen in the chart from Stock Rover*, which is far better than the NASDAQ-100, DJIA, S&P 500 Index, and the Russell 2000 (+13.1%). The Dividend Kings outperformed the S&P 500 for most of the year.

Dividend Kings 2022 Total Return
Source: Stock Rover*

Last Year’s Worst Performers

The three worst performing Dividend Kings in 2021 were Lancaster Colony (LANC), Leggett & Platt (LEG), and MSA Safety (MSA). But in 2022, Lancaster Colony was one of the top performers at +24.7%, while the other two stocks had negative returns.

The Dividend Kings Added Four This Year

There were 34 Dividend Kings at the end of 2021. The total number grew by five this year to 39. Additions to the list were Becton Dickinson & Co (BDX), Kimberley-Clark (KMB), Pepsico (PEP), and Tennant (TNC). Additionally, we have returned Tootsie Roll (TR) to the list.

3 Worst Performing Dividend King Stocks in 2022

After updating for these changes, the three worst performing Dividend King Stocks in 2022 were: Stanley Black & Decker (SWK) at -59.3%, Target (TGT) at -35.8%, and 3M Company (MMM) at -29.5%, as of this writing, based on our watch list in Stock Rover*.

Dividend King Company Returns
Source: Stock Rover*

Stanley Black & Decker Demand Is Lower

Stanley Black & Decker is a worldwide leader in hand tools, power tools, and outdoor equipment., It is also a major player in industrial engineered fasteners and infrastructure. The company owns iconic brands like Stanley, DeWalt, Craftsman, Black+Decker, Cub Cadet, etc. Stanley sold its security business in 2022 to Securitas.

Total revenue was $15,617 million in the fiscal year 2021 and $17,278 million in the last twelve months.

SWK Overview
Source: Stanley Black & Decker Investor Relations

The 150+-year-old company continues to maintain its lead through acquisitions and innovation in its core brands. For example, the 2017 acquisition of Craftsman helped drive the top and bottom lines. Moreover, the company’s brands have extensive distribution and sales channels. Hence, the firm operates in a reinforcing cycle maintaining its market leadership.

Stanley Black & Decker is struggling because of inflation and rising interest rates. The poor macroeconomic environment affects the housing and commercial real estate market, impacting demand. The company benefitted during the COVID-19 pandemic as people staying at home spent on home improvement and outdoor projects facilitated by federal government’s largesse. But a return to more normal habits and the removal of federal stimulus has caused the demand to weaken and affected margins. On a positive note, the Industrial segment is doing well.

Thus, the stock price has been hammered and is down nearly 60% YTD. But the decline is likely overdone. The stock is trading at almost a decade low. In addition, the dividend yield is the highest since 2008, during the subprime mortgage crisis. Investors know of the company because it has one of the longest dividend streaks at 146 years and has increased the dividend for 55 consecutive years.

Portfolio Insight - Dividend Yield History SWK
Source: Portfolio Insight*

Stanley Black & Decker is worth looking at because of its market leadership and dividend history. Granted, interest rates are trending higher, which portends a poor housing market, but the firm had faced challenges before and recovered. Moreover, the conservative payout ratio of about 28% suggests the dividend should be okay.

Target Is Struggling This Holiday Season

Target is one of the largest general merchandise retailers in the United States. It was founded in 1902. The company owns approximately 2,000 stores in the U.S. The retailer sells clothing, electronics, furniture, groceries, over-the-counter medications, beauty, etc. It also operates in-store services.

Total revenue was $104,611 million in the fiscal year 2021 and $107,221 million in the last twelve months.

Target typically grows by adding stores and selling more at existing stores. Also, the company has a significant online presence at about 17% of sales. But, instead of building regional warehouses for the fulfillment, the retailer uses its extant store base to ship e-commerce orders.

The 2022 holiday season is proving challenging for Target. The firm reported mixed Q3 2022 results, missing earnings estimates. The stock price plunged in response. The main issue is Target’s customers are faced with inflation exceeding income growth leading to lower guidance for the fourth quarter. In addition, inventories have risen dramatically, portending future price cuts. Target is also experiencing margin pressure caused by high labor and input costs.

Target should interest most investors because of its market positioning and dividend growth history. That said, 2023 may be difficult if inflation does not slow and interest rates rise further. Although the stock is undervalued, a wait-and-see approach may be best here.

Target Insight
Source: Stock Rover*

3M Company is About Lawsuits Now

3M Company is an industrial conglomerate well-known by dividend growth investors. The company was founded in 1902. Today, it is a leading industrial conglomerate with diverse operations. It has four operating segments: Safety and Industrial, Transportation and Electronics, Healthcare, and Consumer. Most people know 3M by its consumer brands of Scotch, Post-It, Filtrete, Nexcare, ACE, Scotch-Brite, Command, Scotchguard, Tegaderm, and Futuro.

Total revenue was $35,355 million in 2021 and $34,762 million in the last twelve months.

3M Overview
Source: 3M Investor Relations

3M usually grows organically but periodically conducts bolt-on acquisitions and reshapes its portfolio. For example, the firm has acquired businesses to expand in the healthcare space but is now planning on divesting the businesses. Additionally, 3M separated its food safety business and sold it to Neogen in 2022.

As an industrial conglomerate selling to other manufacturers, 3M’s business is cyclical. However, the main issues troubling 3M are lawsuits, earplugs, and forever chemicals. 3M is defending about 235,000 cases related to military earplugs in multi-district litigation. The outcomes of the first few lawsuits have been variable, with 3M winning some and losing some. Next, 3M is battling class action lawsuits related to PFAS chemicals. All these lawsuits’ outcomes are unclear and may drag on for years or decades.

The downward pressure on the stock price has increased the dividend yield to nearly a decade high. But despite the long history of paying a dividend and the 64 years of dividend increases, 3M is no longer on our list of best dividend growth stocks. This is because the outcomes of the lawsuits are too uncertain.

Portfolio Insight - Dividend Yield History MMM
Source: Portfolio Insight*

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Prior Year Worst Performing Dividend Kings


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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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