Industrial investment: 3 industrialists with dividend yields of 3% or more


Industrials offer a good source of long-term dividend growth and provide a surprisingly large number of stocks with very long histories of increasing dividends. In fact, 13 of 65 Dividend Aristocrats – stocks that have increased their dividends for more than 25 consecutive years – come from the industrial sector.

Here are three industrial stocks that have increased their dividends for at least 25 consecutive years and have the ability to generate long-term growth throughout the economic cycle:

Stick with 3M Co.

3M (MMM) has increased its dividend for more than 60 consecutive years. 3M sells more than 60,000 products that are used daily in homes, hospitals, office buildings and schools around the world. It has approximately 95,000 employees and serves customers in more than 200 countries. As of the second quarter of 2019, 3M is now comprised of four distinct divisions: Safety and Industrial, Healthcare, Transportation and Electronics, and Consumer Goods.

Its long-term growth has also been supported by the company’s competitive advantages. 3M’s innovation is one of the company’s greatest competitive advantages. The company targets research and development expenditures equivalent to 6% of its sales (approximately $2 billion per year) to create new products that meet consumer demand. This expense has proven to be beneficial for the company as 30% of sales in the last fiscal year came from products that did not exist five years ago. 3M’s commitment to developing innovative products has led to a portfolio of over 100,000 patents.

3M announced its second-quarter results earlier this month, showing revenue fell 2.8% to $8.7 billion, but was in line with expectations. Adjusted EPS of $2.48 versus $2.59 a year earlier, but $0.04 higher than estimates.

Organic growth for the quarter was 1% for the quarter. Safety & Industrial recorded organic growth of 0.7% as this segment continued to grow in industrial adhesives and tapes, abrasives and masking systems, although personal safety declined again. Transportation and electronics were up 0.5%, with advanced materials, business solutions and automotive original equipment manufacturers advancing in the quarter.

Transportation and security decreased year over year. Healthcare grew 4.4% on strength in separation and purification sciences, health information systems, medical solutions and oral care. Food safety revenue remained stable, while consumption decreased by 2.5%. 3M said earlier in the week he plans to part ways with his health care business into a separate, publicly traded company.

3M provided an updated outlook for 2022, with the company now expecting adjusted EPS of $10.30 to $10.80 for the year, down from $10.75 to $11.25 previously. Still, 3M should remain very profitable even in a difficult economic environment. This is what has allowed 3M to increase its dividend for so many years. The shares are currently yielding 4.2%.

Tools for the job: Stanley Black & Decker

Stanley Black & Decker (SWK) is a world leader in power tools, hand tools and related items. The company ranks first worldwide in tool and storage sales. Stanley Black & Decker is second in the world in commercial electronic security and technical fixing.

The company missed estimates for the second quarter. Revenue of $4.39 billion for the second quarter beat expectations by $350 million. Still, revenue was up 16% for the quarter. Adjusted EPS of $1.77 missed $0.36 per share. Additionally, the company lowered its full-year guidance, now expecting adjusted EPS in the $5.00-$6.00 range for 2022.

Going forward, Stanley Black & Decker should be able to return to earnings growth. The company’s main competitive advantage is its global scale, which allows it to cut costs when the economy turns. Alongside the second quarter financial results, the company announced a new global cost reduction initiative, which is expected to generate pretax savings of $1 billion by the end of 2023 and $2 billion by 3 year.

Although recent results have disappointed investors, we believe the stock is now a compelling buy on valuation and dividends. With the share price down 48% year-to-date, investors now have the option to buy this global leader for a price-earnings ratio of 17.5 and a dividend yield of 3.4 %. The P/E is well below the stock’s average P/E over the past decade, while the dividend yield is near a 10-year high.

The dividend payout ratio is expected to be below 60% at the midpoint of the new guidance range. This indicates that the dividend is safe, even with a reduced forecast for this year. In the meantime, the company continues to increase the dividend each year, as it has done for more than 50 consecutive years.

Meet Matthews International

Matthews International Corporation (MATW) provides branded services, commemorative products and industrial technologies globally. The three sectors of activity of the company are diversified. The SGK Brand Solutions segment is Matthews’ primary sales driver and provides brand development services, printing materials, creative design services and embossing tools to the consumer packaged goods and packaging industries. . The Memorialization segment sells memorial products, caskets and cremation materials to the funeral home industries. The industrial technologies segment is smaller than the other two businesses and designs, manufactures and distributes marking, coding and industrial automation technologies and solutions.

The company posted a double-beat for the second quarter. Revenue of $421.7 million beat expectations by $1.9 million, while adjusted EPS of $0.58 topped two cents per share.

Going forward, the main drivers of EPS growth for Matthews International are acquisitions and cost reductions. The company is looking for complementary acquisition opportunities, which can extend its capabilities into existing businesses or further expand the company geographically. Matthews aims to achieve a long-term annual return on invested capital of at least 12% on these acquisitions. Continued debt reductions will reduce interest charges and Matthews International is working to improve the cost structure. The company has also committed to repurchase shares opportunistically with excess cash flow.

Matthews International’s dividend payout ratio has been very conservative and is expected to reach 29% for this year. This implies a very secure payment. The company has a competitive advantage in that it is uniquely diversified in its business, allowing it to weather different storms on a consolidated basis. Matthews International also differentiates itself by offering a wide range of services on a global scale where it can gain market share in a fragmented industry.

Matthews International has increased its dividend for 28 consecutive years, while the stock yields 3.1%. (Note: MATW is technically not on an aristocrat, as it does not meet the minimum market capitalization requirement, but has been increasing its dividends for over a quarter century.)

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