In this article, we discuss 11 best industrial dividend stocks to buy now. You can skip our detailed analysis of the industrial sector and its performance this year, and go directly to read 5 Best Industrial Dividend Stocks To Buy Now.
The industrial sector in the US is a cornerstone of the economy, encompassing manufacturing, construction, mining, and utilities. The industry has undergone significant transformations, adapting to globalization, technological advancements, and shifts in consumer demands. Automation and digitalization have revolutionized production methods, improving efficiency but also altering the employment landscape. Industrial stocks, typically known for their stability and resilience, often outperform the broader market during periods of economic expansion and recovery. However, despite their historical strength, this year has seen a deviation from the norm. The S&P 500 Industrial Index, which tracks the performance of companies like General Electric Company (NYSE:GE), The Boeing Company (NYSE:BA), and Union Pacific Corporation (NYSE:UNP), has gained 10.53% in 2023 so far, compared with a 20.7% gain of the S&P 500.
Despite the industrial sector's underperformance this year, analysts see this as an opportunity for potential investment. Fidelity Investments mentioned in a report that the US hasn't invested enough in industries for many years. Problems with supply chains during the pandemic and global tensions made it clear that the US should be more self-reliant in industry stuff. Now, the government plans to put hundreds of billions of dollars into building roads and bridges, bringing back jobs to the US, dealing with climate change, and using more electricity. Legislation like the 2022 Inflation Reduction Act (IRA) and the 2021 Infrastructure Investment and Jobs Act are expected to channel hundreds of billions of dollars into these areas. This big investment could help the industrial sector grow a lot in the long run. The report further mentioned that there have been some sectors showing promise for investment opportunities. These include commercial aerospace, utility infrastructure, residential construction, and shipping companies.
Another report from Morningstar also backed up this perspective. According to their findings, construction firms have been leading the way in stock performance this year. However, companies more focused on commercial construction have fallen behind, mainly because of worries surrounding the commercial real estate market. The report also highlighted the firm's positive view of the construction industry in the long term. They believe that despite certain short-term setbacks, there's a favorable outlook. They pointed out that the IRA is likely to keep supporting the industry, especially by encouraging eco-friendly building methods and materials.
Although many investors view AI as primarily related to technology, Todd Sohn, an ETF and technical strategist at Strategas Securities, suggests that the potential advantages of industrials might be an overlooked storyline that deserves a closer look. Sohn mentioned in his interview that the industrial sector had shown strong performance over the past few months. He suggested that the effects of this trend were becoming evident in various securities. According to FactSet data, the Industrial Select Sector SPDR Fund (XLI) has surged by nearly 11% this year, accompanied by inflows surpassing $903 million as of August 2023. He added that for investors seeking a broader investment scope beyond the technology surge, industrials stand positioned to gain advantages from the surge in AI-driven efficiency and productivity, particularly within robotics and automation companies.
Many industrial companies, especially those with established positions and stable cash flows, tend to pay out dividends regularly. These dividends are often seen as a way to attract investors seeking consistent income streams. In view of this, we will discuss some of the best dividend stocks from the industrial sector.
11 Best Industrial Dividend Stocks To Buy Now
A warehouse full of industrial-grade materials handling equipment.
Our Methodology:
For this article, we first scanned Insider Monkey’s database of 910 hedge funds, as of the third quarter of 2023 and selected industrial companies across various segments within the industry, including manufacturing, construction, aerospace and defense, machinery and equipment, transportation and logistics, as well as utilities. From this pool of companies, we identified 11 dividend companies and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q3 2023.
Illinois Tool Works Inc. (NYSE:ITW) is a diversified manufacturing company that produces a wide range of industrial products and equipment. The company offers a quarterly dividend of $1.40 per share, having raised it by 7% in August this year. This marked the company's 51st consecutive year of dividend growth, which makes ITW one of the best dividend stocks on our list. The stock has a dividend yield of 2.24%, as of December 11.
At the end of Q3 2023, 34 hedge funds in Insider Monkey's database reported having stakes in Illinois Tool Works Inc. (NYSE:ITW), the same as in the previous quarter. The overall value of these stakes is more than $854.4 million. With nearly 3 million shares, Fisher Asset Management was the company's leading stakeholder in Q3.
Republic Services, Inc. (NYSE:RSG) is a leader in the waste management and environmental services industry. They provide non-hazardous solid waste collection, transfer, disposal, recycling, and energy services across the US. In the third quarter of 2023, the company posted a strong cash position with its operating cash flow coming at over $2.8 billion and its free cash flow amounting to $1.8 billion. During the quarter, the company returned approximately $470 million in dividends, which makes RSG one of the best dividend stocks on our list.
Republic Services, Inc. (NYSE:RSG) has been raising its dividends for 19 years in a row and it currently pays a quarterly dividend of $0.535 per share. The stock has a dividend yield of 1.32%, as recorded on December 11.
As of the close of Q3 2023, 37 hedge funds tracked by Insider Monkey owned stakes in Republic Services, Inc. (NYSE:RSG), which remained unchanged from the previous quarter. The collective worth of these stakes is over $1.17 billion.
General Dynamics Corporation (NYSE:GD) is a global aerospace and defense company that operates in various segments within the defense industry. On December 6, the company announced a quarterly dividend of $1.32 per share, which was consistent with its previous dividend. The company's dividend growth streak currently stands at 26 years, which makes GD one of the best dividend stocks on our list. As of December 11, the stock has a dividend yield of 2.09%.
At the end of September 2023, 39 hedge funds owned stakes in General Dynamics Corporation (NYSE:GD), according to Insider Monkey's database. These stakes have a total value of more than $7 billion. Longview Asset Management was the largest stakeholder of the company in Q3.
Waste Management, Inc. (NYSE:WM) is a Texas-based prominent waste management and environmental services company. The company provides a range of comprehensive waste management solutions for residential, commercial, industrial, and municipal customers. It currently pays a quarterly dividend of $0.70 per share and has raised its payouts for 20 years running. The stock has a dividend yield of 1.61%, as of December 11.
The number of hedge funds in Insider Monkey's database owning stakes in Waste Management, Inc. (NYSE:WM) grew to 41 in Q3 2023, from 39 in the preceding quarter. The consolidated value of these stakes is nearly $6 billion. Among these hedge funds, Bill & Melinda Gates Foundation Trust was the company's leading stakeholder in Q3.
Air Products and Chemicals, Inc. (NYSE:APD) is an American industrial gas company that caters to a wide range of industries, including manufacturing, technology, healthcare, energy, and more. It is one of the best dividend stocks on our list as the company has been raising its dividends for 41 consecutive years. The company offers a quarterly dividend of $1.75 per share and has a dividend yield of 2.65%, as recorded on December 11.
As of the close of the third quarter of 2023, 43 hedge funds in our database owned stakes in Air Products and Chemicals, Inc. (NYSE:APD), worth collectively over $953.2 million.
Caterpillar Inc. (NYSE:CAT) is a global leader in manufacturing heavy equipment, machinery, engines, and related products used in construction, mining, forestry, energy, transportation, and other industries. The company has been rewarding shareholders with growing dividends for the past 29 years and currently, its quarterly dividend comes in at $1.30 per share. As of December 11, the stock has a dividend yield of 1.99%.
Caterpillar Inc. (NYSE:CAT) remained committed to its shareholder obligation in the third quarter of 2023, as the company returned approximately $1 billion to investors through dividends and share repurchases. In the first nine months of the year, it generated nearly $9 billion in operating cash flow.
Insider Monkey's database of Q3 2023 indicated that 50 hedge funds owned stakes in Caterpillar Inc. (NYSE:CAT), which remained the same as in the previous quarter. These stakes are worth roughly $5 billion in total. With nearly 8 million, Ken Fisher's Fisher Asset Management was the company's leading stakeholder in the third quarter.