Target Has More Cash Cushion, but Stanley’s Dividend Is Still Covered

Target generated a larger cash cushion for its dividend than Stanley Black & Decker in the latest reported periods. But Stanley’s payout is not automatically unfunded: its 2025 free cash flow exceeded the cash it paid in dividends.

Stanley reported $688 million in free cash flow for 2025, against $500.6 million in dividend payments. Net earnings were lower, at $401.9 million, which means dividends exceeded accounting profit. That gap helps explain the concern raised by earnings-based payout comparisons.

The picture is less comfortable looking ahead. Stanley’s July forecast put 2026 free cash flow at $600 million to $800 million, after including a tariff refund and costs tied to selling its aerospace business. At its current quarterly dividend of 84 cents a share, annual payments would be roughly $500 million.

Stanley’s second-quarter results showed $698 million in free cash flow, but the company said tariff refunds helped lift margins. That single quarter does not guarantee the full-year forecast, and the company has other demands on cash, including debt reduction and investment.

Target’s first-half numbers offered more room. For the six months through August 1, it reported $4.52 billion in operating cash flow, spent $2.40 billion on property and equipment, and paid $1.03 billion in dividends. After capital spending, about $2.12 billion remained, roughly twice the dividend total.

That comparison comes with a caveat: Target recorded $994 million in tariff refunds during the first half. Its cash flow also reflected changes in inventory and supplier payments, which can shift from one period to another. The figures support the payout, but they are not a guarantee of the same coverage later.

Both companies recently raised dividends modestly. Stanley lifted its quarterly payment to 84 cents a share; Target’s second-quarter dividend per share was up 1.8% from a year earlier. Target’s latest cash coverage is stronger, while Stanley’s dividend remains supported by forecast cash flow, with less room to spare.

Investors will need to watch whether Target sustains cash generation as it invests in stores and technology, and whether Stanley meets its 2026 cash-flow target without relying on one-time benefits. Free cash after investment, not earnings alone, is the clearer test of both payouts.