Back to top

Image: Shutterstock

3 Industrial Stocks With Decent Dividend Yield to Bank On

Read MoreHide Full Article

The Zacks Industrial Products sector is benefiting from strength across several end-markets, thanks to an increase in industrial production. Per data released by the Federal Reserve, total industrial production increased 0.6% in July, with manufacturing output rising 0.7%. The July index was 3.9% higher than the year-ago level, supported primarily by a 6.6% rise in the production of motor vehicles and parts.

Despite a strong demand environment, those keen on investing in the industrial products sector must be watchful of the prevalent supply chain and cost headwinds. Amid growing uncertainties, it would be wise to invest in some noteworthy dividend stocks like Emerson Electric Co. (EMR - Free Report) , Apogee Enterprises (APOG - Free Report) and Eaton Corporation plc. (ETN - Free Report) .

Semiconductor shortages due to supply-chain constraints are weighing on volumes and delaying deliveries for industrial companies. High raw material and transportation costs are hurting margin performance. Pricing actions are partly offsetting the adversity.

Weak revenues from China due to reduced demand as a result of coronavirus-induced lockdowns are an added concern for the industrial products sector. The persistent shortage of skilled labor in the United States also weighs on the operations of industrial companies.

Geopolitical tensions between Russia and Ukraine are hurting the top lines of industrial companies as some exit the Russian market while others experience volume softness.

Amid weaknesses in the industrials sector and the broad market uncertainty owing to recession fears, investing in high-quality dividend stocks will not only provide a steady source of income but also offer protection against downside risk. These stocks are generally less volatile and hence are dependable when it comes to long-term investment planning.

3 Industrial Stocks for Dividend Investors

In order to choose some of the best dividend stocks from the sector, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2%, a sustainable dividend payout ratio of less than 60% and a five-year historical dividend growth of greater than or equal to 0.001 (to ensure that the company has grown dividend over the past five years). Each of the stocks mentioned below carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Emerson: Headquartered in St. Louis, MO, Emerson is a diversified global engineering and technology company. EMR pays out a quarterly dividend of 51.5 cents ($2.06 annualized) per share, which gives it a 2.52% yield at the current stock price. This company’s payout ratio is 42%, with a five-year dividend growth rate of 1.48%. (Check Emerson’s dividend history here).

Emerson is poised to benefit from the strong demand for its technology, software and solutions. Strength in the energy, chemicals, power, renewable, life sciences and metals and mining end markets and a robust backlog level bode well for the company.

Emerson Electric Co. Dividend Yield (TTM)

Emerson Electric Co. Dividend Yield (TTM)

Emerson Electric Co. dividend-yield-ttm | Emerson Electric Co. Quote

Apogee: Apogee provides architectural glass, aluminum framing systems and installation services for buildings and value-added glass and acrylic for custom picture framing and displays. APOG pays out a quarterly dividend of 22 cents (88 cents annualized) per share, which gives it a 2.22% yield at the current stock price. This company’s payout ratio is 29%, with a five-year dividend growth rate of 9.06%. (Check Apogee’s dividend history here).

Strong performance in the Architectural Services and Framing Systems is driving Apogee’s growth. Strong backlog growth owing to a robust pipeline of projects and improving order trends are expected to drive the company’s top line in the coming years.

Eaton: Eaton is a diversified power management company based in Dublin, Ireland. ETN pays out a quarterly dividend of 81 cents ($3.24 annualized) per share, which gives it a 2.36% yield at the current stock price. This company’s payout ratio is 47%, with a five-year dividend growth rate of 5.57%. (Check Eaton’s dividend history here).

Eaton’s investments in research and development to introduce products should drive its growth. The company’s strategy to manufacture in the zone of sale has helped it to offset the impact of the tariff on material prices, which is expected to support the bottom line.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Emerson Electric Co. (EMR) - free report >>

Eaton Corporation, PLC (ETN) - free report >>

Apogee Enterprises, Inc. (APOG) - free report >>

Published in