General Electric Company (GE), Illinois Tool Works Inc. (ITW): Good Dividends in Diversified Machinery

Sustainable growth?

Hubbell Incorporated (NYSE:HUB.B) is a much smaller company that the previous two discussed in this article, pulling only $3 billion in gross revenue in 2012. However, the company has held steadfastly to its dividend payments since 2000. A dividend with a consistent history is a dividend you have a reasonable chance of getting for years to come. For a small company, Hubbell’s 9.9% profit margins are also fairly solid.

One issue an astute investor may be concerned about is that wire and other electrical products tend to sell well during extensive infrastructure growth phases, such as what’s been happening in India and China over the past few years. As these white-hot growth markets inevitably cool, how will Hubbell continue to grow and prosper?

Hubbell’s 2.1% dividend is nice for right now, but I would suggest watching and waiting to buy until the price goes lower — I would rate the price ideal in the $50 per-share range or less because the lower price would provide a larger margin of safety if the earnings dropped off.

Conclusion

There is a lot to think about when you consider buying a machinery company because you want dividends that’ll churn off the line for a long time to come. Will the company’s market dry up? Will it be caught doing something naughty? Can you find a good deal on it? There are all questions you should consider carefully before you buy.

The article Good Dividends in Diversified Machinery originally appeared on Fool.com.

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