In this article we will take a look at 10 best industrial dividend stocks for 2021. You can skip our detailed discussion about the merits of dividend investing and go directly to 5 Best Industrial Dividend Stocks For 2021.
The coronavirus crisis has hammered the global economy. Countries facing their second or even a third waves of the pandemic are still struggling to get their economy back on track. Some, despite the second wave, have shown reasonable success. Excluding the two sharp swings (-31.4% in 2nd quarter, 2020 and +33.4% in 3rd quarter, 2020), the fourth quarter GDP in the US registered 4.1% growth.
Massive liquidity injection helped Wall Street beat the COVID blues and climb past pre-COVID levels to report new highs. As the appetite for risk assets has risen so has the concerns of high valuations.
Best Industrial Dividend Stocks For 2021
Investors looking for total return in equities tend to seek dividend-paying names. Dividends as the income component of stocks provide a limited cushion against adverse price movement. According to a RidgeWorth Investments report, compounded dividends on average accounted for approximately 50% of stock total returns from 1930 until 2010. The report highlighted the performance cushion dividends provided during difficult economic periods like 1930s, 1970s and 2000s. Dividend payments are arbitrary and depend upon company’s cash flow. Therefore, a company declaring dividend is deemed to have sufficient free cash flow even if it has an operating loss. Dividend-paying stocks provide sustainable yield compared to the ones that do not. They also indirectly compete against the bonds that provide some yield but have somewhat limited gain potential.
Most beginner investors like to look for high dividend-paying stocks. Hunting for unusually high dividend is not a recommended exercise as companies focused on returning cash to shareholders end up avoiding capital expansion. This could cost them opportunities in potential future growth projects. Instead, it’s better to focus on companies which offer consistent dividend hikes, without any cuts or suspensions.
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Income investing has become extremely important as volatility in the markets is rising. Even the smart money is losing its returns. The hedge fund industry is losing ground amid severe losses. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
In this article we identify 10 best industrial dividend stocks for 2021. These stocks not only pay dividends but have also increased their dividends for at least 15 consecutive years. The list consists of companies that have consistently dividends and have strong earnings growth prospects. These companies have balance sheets strong enough to absorb short-term economic shocks and uncertainties.
Let’s start our list of the 10 best industrial dividend stocks for 2021.
10. L3Harris Technologies, Inc. (NYSE: LHX)
Dividend Yield: 2.14%
L3Harris Technologies, Inc. is a Florida-headquartered American technology company, defense contractor, and information services provider. With a workforce of 50,000 spread within the US and across a dozen countries overseas, the company produces host of wireless equipment, tactical radios and C6ISR systems. The company provides vital communication technology in the defense, maritime and space, among others, sectors. It provided the avionics and communication technology to Nasa for a critical link to control the Perseverance Rover after its landing on Mars. The company has recently sold its military training and combat propulsion systems businesses for $1.45 billion.
The stock is up 13.41% over the last 12 months.
9. Northrop Grumman Corporation (NYSE: NOC)
Dividend Yield: 1.90%
Founded in 1939, NOC is the 9th best pick in our list of 10 best industrial stocks to buy for 2021. With 90,000 employees, and an annual revenue in excess of $30 billion, NOC is a leading American global aerospace and defense technology company. As one of the largest weapons manufacturers and military technology providers, NOC primarily operates through four business segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems.
The median dividend growth rate for NOC for the past 13 years has been 11.20%. Credit Suisse, Morgan Stanley, and Susquehanna have reiterated their overweight position on the stock in 2021. The stock is down -5.31% over the last 12 months.
8. Waste Management, Inc. (NYSE: WM)
Dividend Yield: 1.87%
Houston, Texas-based Waste Management is a leading American waste management, comprehensive waste, and environmental services company serving clients in North America. WM operates the largest landfill network in the US and Canada, and generates high free-cash-flow. The consumer spending growth in the US on the back of economic growth is guaranteed to yield waste growth. With the environment being one of the core focus areas worldwide, WM has a recession-resistant business model.
Ethisphere has rated WM as one of the 2021 world’s most ethical companies for the 12th time. The stock is up 19.96% over the last 12 months.
7. Emerson Electric Company (NYSE: EMR)
Dividend Yield: 2.27%
Founded in 1890, EMR – an American multinational corporation – is a Fortune 500 constituent. The company designs and manufactures technology and engineering products for industrial, commercial, and consumer markets worldwide. Its main operational segments include Automation Solutions, and Residential & Commercial Solutions.
EMR has been beating earnings estimate consensus in the recent quarters resulting in analysts’ upgrades. The stock is up 116.48% over the last 12 months.
In one of their investor letters, Fiduciary Management highlighted a few stocks and Emerson Electric Co (NYSE:EMR) is one of them. Here is what Fiduciary Management said:
“Emerson Electric offers a wide range of products and services primarily in the areas of Automation, HVAC & Refrigeration, and Construction. The company is comprised of Automation Solutions, Climate Technologies, and Tools & Home Products. Emerson has market-leading positions thanks to their domain knowledge, innovation (differentiated technology), and services & solutions capability to address complex challenges in critical markets. Automation Solutions enable customers to maximize production while reducing costs, and Climate Technologies improves energy efficiency, enhances comfort, and protects food quality. Although a cyclical company, nearly 40% of total sales come from the maintenance, repair and optimization portion of Automation Solutions (significant installed base). The replacement nature of Climate Technologies also helps this part of the business be less cyclical in a downturn. In addition to contingency plans in the current economic environment, the company’s balance sheet is positioned very conservatively (strong investment-grade credit) and they have plenty of liquidity. With a compelling valuation, we feel that Emerson is an attractive investment opportunity over our time horizon.”
6. Illinois Tool Works, Inc. (NYSE: ITW)
Dividend Yield: 2.09%
Founded in 1912, ITW is an American Fortune 200 company that produces engineered fasteners and components, equipment and consumable systems, and specialty products worldwide. ITW’s seven industry-leading segments leverage the company’s differentiated and proprietary business model to generate solid growth and best-in-class margins and returns.
ITW is a high-beta stock, with analysts’ estimating a 38% profit growth over the next couple of years, coupled with expected higher free-cash-flow. The stock is up 54.15% over the last 12 months.
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Disclosure: None. 10 Best Industrial Dividend Stocks For 2021 is originally published on Insider Monkey.
