In this article, we will take a look at some of the best industrial stocks that pay dividends.
Industrial stocks play a crucial role in economic growth, encompassing a wide range of businesses, from manufacturing to transportation. This sector often performs well during periods of economic expansion and stands to gain from higher government investment in infrastructure projects. Although the sector is diverse, companies within it exhibit common characteristics and are positioned to benefit from several overarching trends. These factors contribute to the view that industrials play a significant role in the equity portion of a well-diversified portfolio.
In recent years, the industrial economy has generally experienced improving demand trends, though certain areas, such as manufacturing automation, have shown signs of weakening. A report by Edward Jones suggested that while the recovery is expected to continue, several near-term uncertainties could impact the sector’s growth. These include a potential slowdown in economic expansion, ongoing geopolitical challenges, and declining business and consumer confidence.
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Additionally, the growing risk of a global trade war between the United States and key trading partners has introduced further uncertainty for the industrial sector. While the administration has announced tariffs on materials such as steel and aluminum, the full impact of these measures remains unclear. Further tariff actions are anticipated, with a likely focus on China and the European Union. In response, these regions are expected to retaliate through tariffs or other policy measures.
In 2024, the industrial sector delivered solid returns overall, though it slightly trailed the broader market in what was a strong year for stocks. A report by Fidelity Investments noted that industrials started the year on a strong footing, generally keeping pace with the broader market through April. However, the sector underperformed in May and June before rebounding in July, emerging as one of the market’s stronger segments. It largely maintained those relative gains through mid-December. This uneven performance reflected a balance between optimism surrounding a potential soft landing for the US economy and a surge in major construction projects, contrasted with concerns over weak manufacturing indicators and historically high stock valuations.
The Fidelity report also highlighted several key themes that could present investment opportunities in the coming year. One of the primary themes is the resurgence of manufacturing within the United States. Various factors are driving an unprecedented wave of reinvestment in domestic infrastructure, efforts to onshore supply chains to mitigate geopolitical risks, and increased investments in electrification and artificial intelligence development.
The cyclical nature of industrial stocks has contributed to strong performance over time. Over the past three years, the market’s Industrial Index has slightly outpaced the broader market, driven by solid growth across several key industries, including Aerospace & Defense, Building Products, Machinery, and Electrical Equipment. This year, as stocks have been in negative territory for a while now, the industrial sector has recorded a 0.74% decline, while the broader market has fallen by nearly 3%. Given this, we will take a look at some of the best industrial stocks that pay dividends.
Our Methodology
For this article, we first scanned Insider Monkey’s database of over 1,000 hedge funds, as of the fourth quarter of 2024 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 12 dividend companies and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12. Nordson Corporation (NASDAQ:NDSN)
Number of Hedge Fund Holders: 28
Nordson Corporation (NASDAQ:NDSN) is an American multinational company that designs and produces dispensing equipment used for applying adhesives, sealants, coatings, and other materials. In fiscal Q1 2025, the company delivered mixed financial results. Quarterly revenue totaled $615.4 million, reflecting a 2.8% decline from the previous year. Sales received an 8% boost from acquisitions, but this was offset by a 9% drop in organic sales and a 2% negative impact from currency fluctuations. Net income for the quarter stood at $95 million, translating to earnings of $1.65 per diluted share, down from $110 million, or $1.90 per diluted share, in the same period last year.
Despite the lower earnings, Nordson Corporation (NASDAQ:NDSN) saw broad-based growth in order intake, leading to an $85 million increase in backlog. Based on current trends and order visibility, the company expects second-quarter fiscal 2025 sales to be in the range of $650 million to $690 million. Adjusted earnings per diluted share for the quarter are projected between $2.30 and $2.50.
By the end of the quarter, Nordson Corporation (NASDAQ:NDSN) held $130.4 million in cash and cash equivalents, up from $116 million a year earlier. The company also generated $160 million in operating cash flow during the quarter, while free cash flow reached $137.7 million. Due to this strong cash position, the company holds one of the longest dividend growth streaks in the market, spanning 61 years. Currently, it pays a quarterly dividend of $0.78 per share and has a dividend yield of 1.48%, as of March 17.
11. A. O. Smith Corporation (NYSE:AOS)
Number of Hedge Fund Holders: 35
A. O. Smith Corporation (NYSE:AOS) is a Wisconsin-based manufacturing company that specializes in residential and commercial water heaters for its consumers. The company specializes in innovative technologies focused on energy efficiency, sustainability, and smart water management, addressing the rising demand for reliable and environmentally friendly water solutions. Its strong distribution network and dedication to research and development have reinforced its standing as a trusted leader in the water industry.
A. O. Smith Corporation (NYSE:AOS) posted mixed financial results for the fourth quarter of 2024, with revenue reaching $912.4 million—an 8% decline from the previous year. After achieving three consecutive years of record sales, A. O. Smith saw a downturn in 2024, primarily due to a weaker economy in China that dampened consumer demand. In North America, water heater sales also softened in the latter half of the year. However, boiler sales in the region grew by 8%, supported by increased demand for high-efficiency commercial products.
Despite these challenges, A. O. Smith Corporation (NYSE:AOS) maintained a solid cash position in 2024. The company generated $581.8 million in operating cash flow, while free cash flow for the year totaled $473.8 million. It also returned $496 million to shareholders through dividends and share repurchases. As of December 31, 2024, the company held approximately $240 million in cash and cash equivalents. Its quarterly dividend comes in at $0.34 per share and has a dividend yield of 2.02%. The company has been making regular dividend payments for 85 years. Moreover, it has raised its payouts for 32 years in a row, which makes AOS one of the best industrial stocks that pay dividends.
10. Dover Corporation (NYSE:DOV)
Number of Hedge Fund Holders: 44
Dover Corporation (NYSE:DOV) is an Illinois-based manufacturer of industrial products. In the fourth quarter of 2024, the company reported revenue of $1.9 billion, representing a 1% year-over-year increase. GAAP earnings from continuing operations declined by 8% to $238 million, while GAAP diluted EPS from continuing operations decreased by 7% to $1.72. On an adjusted basis, earnings from continuing operations remained steady at $305 million, with adjusted diluted EPS increasing by 1% to $2.20.
Dover Corporation (NYSE:DOV) provides a broad portfolio of innovative equipment and components, adapting to shifts in the industrial landscape amid ongoing market changes and strategic transitions. As the company positions itself for future growth, investors and analysts continue to monitor its financial performance and key business decisions. A closer look at its latest earnings, strategic initiatives, and market presence offers valuable insights into its current standing and long-term growth prospects. The stock has surged by nearly 5% in the past 12 months.
Dover Corporation (NYSE:DOV) maintained a solid cash position, closing the quarter with more than $1.8 billion in cash and cash equivalents—a significant increase from the $400 million reported in the same period last year. For the full year 2024, the company generated over $1 billion in operating cash flow.
The company currently distributes a quarterly dividend of $0.515 per share, yielding 1.13% as of March 17. With a remarkable dividend growth track record spanning more than 68 years, it stands among the longest-running dividend growth companies in the market, securing its place as one of the best industrial stocks that pay dividends.
9. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 46
General Dynamics Corporation (NYSE:GD) is a Virginia-based aerospace and defense corporation. It plays a significant role in the defense industry, supplying equipment and services to the United States military and other armed forces around the world. The company also operates one of the largest IT and services divisions within the defense sector, providing a steady revenue stream even during periods when the Pentagon reduces spending on military equipment. Since the start of 2025, the stock has surged by nearly 2%.
In the fourth quarter of 2024, General Dynamics Corporation (NYSE:GD) reported revenue of $13.3 billion, which showed a 14.3% growth from the same period last year. The revenue also beat analysts’ estimates by $521.4 million. By the end of the year, the company had a backlog totaling $90.6 billion. In addition, management estimated the potential contract value—reflecting the projected worth of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts, and unexercised options—at $53.4 billion. Combining all these components, the total estimated contract value reached $144 billion, marking a 9.1% increase compared to the previous year.
General Dynamics Corporation (NYSE:GD)’s cash position came in strong. The company generated $2.2 billion in operating cash flow during the quarter, which represented 188% of net earnings. In FY24, it returned $3 billion to shareholders through dividends and share repurchases.
On March 5, General Dynamics Corporation (NYSE:GD) declared a 5.6% hike in its quarterly dividend to $1.50 per share. Through this increase, the company stretched its dividend growth streak to 28 years, which makes GD one of the best industrial stocks that pay dividends. As of March 17, the stock has a dividend yield of 2.26%.
8. Illinois Tool Works Inc. (NYSE:ITW)
Number of Hedge Fund Holders: 49
Illinois Tool Works Inc. (NYSE:ITW) is a diversified industrial company operating across seven key segments, including automotive original equipment manufacturing, construction products, food equipment, polymers and fluids, specialty products, test and measurement and electronics, and welding. In 2024, the company allocated approximately $800 million to drive long-term expansion within its core business areas and aims to further accelerate its customer-back innovation (CBI) investments in the years ahead. As part of its commitment to innovation and solving customer challenges, the company also increased its patent filings by 18% during the year.
In the fourth quarter of 2024, Illinois Tool Works Inc. (NYSE:ITW) posted revenue of $3.9 billion, down 1.28% from the same period last year. The revenue also missed analysts’ estimates by over $50 million. However, the company’s GAAP earnings per share (EPS) rose 7% to $2.54. Its operating margin improved to 26.2%, reflecting a 140-basis-point increase, with enterprise initiatives accounting for 120 basis points of the gain.
Illinois Tool Works Inc. (NYSE:ITW) is one of the best industrial dividend stocks with a solid cash position. In the most recent quarter, the company generated $1.1 billion in operating cash flow, while free cash flow reached a record $1 billion, reflecting a 10% increase and a conversion rate of 133%. For FY25, the company expects free cash flow to exceed net income and intends to buy back around $1.5 billion worth of its shares. The anticipated effective tax rate is estimated to range between 24% and 24.5%.
Illinois Tool Works Inc. (NYSE:ITW) currently offers a quarterly dividend of $1.50 per share and has a dividend yield of 2.34%, as of March 17. In 2024, the company extended its dividend growth streak to 52 years.
7. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 59
United Parcel Service, Inc. (NYSE:UPS) is an American multinational shipping & receiving and supply chain management company. Over the past year, the stock has fallen more than 22% as the company worked through longstanding challenges. This included divesting noncore operations, modernizing its business processes, shifting focus toward higher-margin segments like healthcare, and expanding its customer base.
In the fourth quarter of 2024, United Parcel Service, Inc. (NYSE:UPS) reported $25.3 billion in revenue, reflecting a 1.54% year-over-year increase. The company also reached a preliminary agreement with its largest customer to scale back volume by more than 50% by the latter half of 2026. In addition, it has taken full control of its SurePost product. In response, the company is restructuring its US network and implementing a multi-year efficiency program designed to optimize operations and achieve approximately $1 billion in cost savings through an extensive process overhaul.
In February, United Parcel Service, Inc. (NYSE:UPS) raised its quarterly dividend by 0.6% to $1.64 per share, marking its 23rd consecutive year of dividend growth. As of March 17, the stock offers a dividend yield of 5.56%, making it an attractive option for income investors. Strong cash flow continues to support shareholder returns, with UPS generating $10.1 billion in operating cash flow and $6.3 billion in free cash flow in fiscal 2024. The company also distributed $5.9 billion to shareholders through dividends and stock repurchases.
6. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 60
Air Products and Chemicals, Inc. (NYSE:APD) is an American multinational company that specializes in industrial gases, performance materials, and related equipment and services. In fiscal Q1 2025, the company’s revenue totaled $2.9 billion, reflecting a 2% decline from the previous year. This decrease was primarily due to a 2% drop in sales volume and a 1% negative currency impact, which were partially offset by a 1% increase in pricing. The decline in volume was largely driven by the sale of the LNG business in September 2024 and lower contributions from on-site and merchant operations in Europe. However, these factors were partially mitigated by a one-time, large helium sale to an existing merchant customer in the Americas. The LNG divestiture alone accounted for roughly a 2% impact on sales.
Air Products and Chemicals, Inc. (NYSE:APD) is among the largest global suppliers of merchant hydrogen and a key player in hydrogen fuel infrastructure. With over 100 hydrogen plants, it has the capacity to produce 7 million kilograms of fuel per day. The company aims to be at the forefront of addressing global energy and environmental challenges by focusing on gasification, carbon capture, and clean hydrogen. It is currently working on several large-scale hydrogen projects expected to be completed in the coming years. One of its major investments includes a $4.5 billion project in Louisiana to develop the world’s largest blue hydrogen facility. Once operational, the facility is projected to capture and permanently store over 5 million metric tons of carbon dioxide annually.
Air Products and Chemicals, Inc. (NYSE:APD) generated over $811 million in operating cash flow in the most recent quarter, up from $626.6 million in the prior year period. The company offers a quarterly dividend of $1.79 per share, having raised it by 1.1% in January. This marked the company’s 43rd consecutive year of dividend growth, which makes it one of the best industrial stocks that pay dividends. ADP supports a dividend yield of 2.08%, as of March 17.
5. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 62
Caterpillar Inc. (NYSE:CAT) ranks fifth on our list of the best industrial stocks that pay dividends. The American manufacturing company specializes in construction, mining, and other engineering equipment. In the fourth quarter of 2024, the company reported $16.2 billion in revenue, marking a 5% decline from the previous year. The drop was largely attributed to an $859 million decrease in sales volume, driven by shifts in dealer inventories and weaker equipment sales to end users. Dealer inventory levels fell by $1.3 billion during the quarter, a steeper reduction compared to the $900 million decline recorded in the same period of 2023. Despite the revenue decline, profit per share rose to $5.78, up from $5.28 a year earlier.
Caterpillar Inc. (NYSE:CAT) remained financially strong throughout 2024, generating $12.0 billion in operating cash flow and ending the fourth quarter with $6.9 billion in cash. Over the year, the company returned capital to shareholders through $7.7 billion in share repurchases and $2.6 billion in dividend payments. Its robust cash flow has supported 30 consecutive years of dividend increases. Currently, it pays a quarterly dividend of $1.41 per share for a dividend yield of 1.65%, as of March 17.
The number of hedge funds tracked by Insider Monkey owning stakes in Caterpillar Inc. (NYSE:CAT) grew to 62 in Q4 2024, from 50 in the previous quarter. The consolidated value of these stakes is more than $6.8 billion. With over 9 million shares, Fisher Asset Management was the company’s leading stakeholder in Q4.
4. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 65
Lockheed Martin Corporation (NYSE:LMT) is an American defense and aerospace manufacturing company, headquartered in Texas. The company specializes in advanced technology systems, services, and products. It showcased strong cash generation in fiscal 2024, reporting $7 billion in operating cash flow and $5.3 billion in free cash flow. The company returned $6.8 billion to shareholders through dividends and share repurchases. It currently pays a quarterly dividend of $3.30 per share, with a yield of 2.82% as of March 18. With 22 consecutive years of dividend growth, LMT is one of the best industrial dividend stocks.
In the fourth quarter of 2024, Lockheed Martin Corporation (NYSE:LMT) reported $18.6 billion in revenue, a 1.3% decline from the previous year. Despite this, the company remained focused on strengthening national security, investing over $3 billion in research, development, and capital expenditures to support customer initiatives. These efforts were aimed at fostering innovation and enhancing operational efficiency through advanced digital and manufacturing technologies. The company’s solid financial performance also enabled it to return more than 100% of its free cash flow to shareholders over the year.
At the end of Q4 2024, 65 hedge funds in Insider Monkey’s database held stakes in Lockheed Martin Corporation (NYSE:LMT), growing from 58 in the previous quarter. The consolidated value of these stakes is more than $2.36 billion. Among these hedge funds, Two Sigma Advisors was the company’s leading stakeholder in Q4.
3. FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Holders: 66
FedEx Corporation (NYSE:FDX) is an American multinational holding company that specializes in transportation, e-commerce, and business services. In fiscal Q2 2025, the company reported revenue of $22 billion, which fell slightly by 0.9% from the same period last year. The Federal Express segment achieved operating profit growth despite facing several challenges, including sluggish US domestic demand and the expiration of its contract with the US Postal Service.
In the second quarter of fiscal 2025, FedEx Corporation (NYSE:FDX) allocated $820 million toward capital expenditures, bringing its total spending for the year to $5.2 billion. The company also repurchased $1 billion worth of shares during the quarter, bringing its total buybacks for the year to $2 billion, with an additional $500 million planned for the second half.
On February 6, 2025, FedEx Corporation (NYSE:FDX) acquired RouteSmart Technologies, a global leader in route optimization, to enhance its operational efficiency. The two companies, which have a long-standing partnership, anticipate a seamless integration while ensuring RouteSmart continues serving various industries. RouteSmart will operate independently under FedEx Dataworks, further strengthening its logistics technology capabilities.
FedEx Corporation (NYSE:FDX) currently offers a quarterly dividend of $1.38 per share and has a dividend yield of 2.25%, as of March 17. The company has been growing its payouts for four consecutive years.
2. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 79
3M Company (NYSE:MMM) is a multinational conglomerate, based in Minnesota, US. The company operates in a wide range of industries. While the broader industry has struggled with high costs and slowing economic activity, this company has been one of the few industrial stocks to perform well. Over the past year, 3M Company (NYSE:MMM) has surged by nearly 75%, driven by successful cost-cutting measures.
In its fourth-quarter 2024 earnings report, 3M Company (NYSE:MMM) posted revenue exceeding $6 billion, surpassing analysts’ expectations by $157 million. Recently, the company has concentrated on strengthening its core business areas, with innovation remaining a top priority. Significant investments in proprietary technologies and patents have reinforced its competitive edge. In addition, efforts to enhance operational efficiency—particularly within its supply chain—have resulted in a 70% improvement in supplier on-time delivery. The company’s ability to navigate regulatory challenges and ongoing litigation has also played a key role in maintaining financial stability and bolstering investor confidence.
3M Company (NYSE:MMM) maintained a steady cash position in fiscal 2024, generating $1.8 billion in operating cash flow and $4.9 billion in free cash flow. Over the year, the company returned $3.8 billion to shareholders through dividends and share repurchases. On February 4, it declared a 4.3% hike in its quarterly dividend to $0.73 per share. This was the company’s first dividend hike since slashing its payout by 50% in May last year. The stock has a dividend yield of 1.91%, as of March 17.
1. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 93
Union Pacific Corporation (NYSE:UNP) is a US-based railroad holding company that transports a diverse range of products and commodities, giving it broad exposure across various industries, including agriculture, automotive, and energy. In recent years, the company has focused on improving efficiency by expanding its revenue sources and strengthening its geographic reach—key factors in maintaining competitiveness in the rail transportation sector.
In the fourth quarter of 2024, Union Pacific Corporation (NYSE:UNP) reported $6.12 billion in revenue, reflecting a 1% year-over-year decline. However, a 5% increase in revenue carloads helped offset some of the downturn. The company’s operating ratio improved to 58.7%, a 220-basis-point enhancement, despite a 70-basis-point impact from a crew staffing agreement ratification. Operating income rose by 5%, reaching $2.5 billion.
A strong cash position has allowed Union Pacific Corporation (NYSE:UNP) to remain one of the best industrial stocks that offer dividends. The company has consistently paid dividends for 125 consecutive years and has increased its payouts for 18 straight years. In fiscal 2024, it generated more than $9.3 billion in operating cash flow and ended the quarter with over $1 billion in cash and cash equivalents. Its quarterly dividend currently sits at $1.34 per share for a dividend yield of 2.25%, as of March 17.
Overall, Union Pacific Corporation (NYSE:UNP) ranks first on our list of best industrial dividend stocks. While we acknowledge the potential of UNP as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than UNP but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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