Illinois Tool Works Has Raised Its Dividend for 63 Years. These 3 Industrial Stocks Are Worth Watching
One industrial giant just logged its 63rd straight dividend raise, but three other names in the sector are quietly building the case that they deserve a spot in a retirement portfolio first.
Retirement income works best when payouts grow every year, regardless of what the economy is doing. Four industrial names fit that brief. They include two automation-and-machinery compounders, a tool maker in the middle of a turnaround, and a parts distributor about to split in two. All four have long records of dividend increases. The standout is Illinois Tool Works (NYSE:ITW | ITW Price Prediction), which just announced its 63rd consecutive year of dividend increases. Below, we rank each name by how well its cash flow covers the dividend before we get to yield.
Illinois Tool Works: A 63-Year Raise Streak Backed by Record Margins
Dividend safety. ITW pays for its dividend out of very large cash flows. Third-quarter free cash flow came in at $851 million, or 100% of net income, and free cash flow through the first nine months grew 9% to more than $2 billion. Management expects full-year free cash flow conversion of approximately 100% of net income. The new annualized dividend of $6.88 per share uses roughly 60% of the midpoint of raised full-year GAAP EPS guidance of $11.45 to $11.55. That leaves room for both raises and buybacks. ITW returned $2.7 billion to shareholders in the first nine months of the year. ITW keeps its balance sheet lean by design: $809 million in cash and $3.14 billion of shareholders’ equity. Years of buybacks have shrunk the equity base, which explains a price-to-book ratio of 27.18.
Yield. At the current price of $276.07, the new payout works out to a yield of about 2.49%.
Track record. The most recent quarterly payment rose to $1.72 from $1.61, a 7% increase. Sixty-three straight years of raises put ITW well past the 50-year bar for Dividend King status.
Bull case. Operating margin hit a record 27.8%, and management says its “4% plus organic growth and 30% operating margins by 2030” framework is intact. Demand tied to semiconductors and AI pushed Electronics up 31% for a retiree, adding to a business that keeps getting more profitable, which should keep raises coming. The stock trades at a forward P/E of 22.
Risk. Some end markets are soft. Automotive OEM organic revenue fell 2%, and Construction Products slipped 1% organically, with margins in both segments down 170 basis points.
Emerson Electric: The Best-Covered Dividend in the Group
Dividend safety. Emerson Electric (NYSE:EMR) has the widest buffer of the four. Management guides to full-year free cash flow of about $3.6 billion, against planned dividends of $1.2 billion. The annualized dividend uses about 34% of adjusted EPS guidance of $6.55. Third-quarter free cash flow rose 36% to $1.32 billion. Emerson also plans $1 billion in share repurchases this fiscal year, showing how much cash remains after the dividend.
Yield. The trailing yield is 1.32%, the lowest in this group.
Track record. In the dividend record, Emerson’s quarterly payout rose every year from $0.2625 in 2007 to $0.555 today. The latest step-up was from $0.5275.
Bull case. Emerson is now an automation and industrial software company. Maintenance, repair, and operations make up 65% of sales, providing steady, recurring revenue. The backlog was $8.2 billion, and the project pipeline grew to $12.4 billion, with power and semiconductor demand leading the way. With that much growth and coverage, the dividend has plenty of room to grow faster.
Risk. You pay for that quality. The starting yield is low, and the trailing P/E is 37, compared with a forward P/E of 23. Retirees who need cash now get less income per dollar invested here than from any other name on this list.
Genuine Parts: Highest Yield, Longest Visible Run of Raises
Dividend safety. Genuine Parts (NYSE:GPC) distributes auto replacement parts through NAPA and industrial parts through Motion. Its coverage is the tightest of the four. Free cash flow of approximately $500 million so far this year compares with approximately $434 million paid in dividends. Full-year free cash flow guidance is $550 million to $700 million. On adjusted earnings, the payout looks more comfortable, at roughly 56% of the midpoint of $7.50 to $7.75 guidance. Restructuring and separation charges cut GAAP EPS to $0.26 on a trailing basis, so the trailing P/E is misleading. The forward P/E is 15. Cash on hand was $763 million.
Yield. At 3.46%, GPC has the highest yield in this group.
Track record. The dividend record shows an annual increase from a $0.26 quarterly payment in 1999 to $1.0625 now, with no break in the sequence.
Bull case. The Industrial segment is gaining speed. Sales rose 6% to $2.4 billion, and EBITDA margin expanded to 13.2%. Growth showed up in 12 of the 14 end markets the company tracks. Once Motion becomes its own company, investors will be able to value the higher-margin business directly.
Risk. The separation into two public companies is targeted for the first quarter of next year, and management has not said how it will split the dividend between them. The CFO says capital allocation details for both companies will come at the Investor Days, so income holders should keep an eye on those plans.
Stanley Black & Decker: A Deleveraging Story With a Fresh Raise
Dividend safety. Stanley Black & Decker (NYSE:SWK) has improved its coverage. After selling its aerospace fasteners business for $1.8 billion, the company paid down $1.7 billion of debt and is targeting net debt to adjusted EBITDA “at or around 2.5x by year-end”. The current payout costs about $507 million a year. That fits within free cash flow guidance of $600 million to $800 million and is roughly 61% of the midpoint of adjusted EPS guidance of $5.20 to $5.80. Management lists the dividend as a top priority: “Our priorities remain to invest in growth, support the dividend, repurchase shares and pursue M&A if and when appropriate.”
Yield. The trailing yield is 3.34%.
Track record. The latest quarterly payment rose to $0.84 from $0.83. The dividend record shows the quarterly amount climbing steadily from $0.22 in 1999.
Bull case. DEWALT, CRAFTSMAN, and STANLEY all posted organic growth. Adjusted gross margin rose 620 basis points to 33.7%, and management is targeting 35% to 37% by the end of 2028. Barron’s recently described the company as tooling up for an industrial recovery. At a forward P/E of 16, investors buying today get a well-supported yield plus a chance at a re-rating.
Risk. Some recent earnings strength may not last. Net tariff refunds added about $0.17 to second-quarter adjusted EPS, and first-quarter operating cash flow was negative $388.8 million before the rebound.
Four Ways to Build a Rising Industrial Income Stream
Together, these four cover different needs in an income portfolio. ITW offers the longest verified streak. Emerson has the strongest cash coverage, Genuine Parts has the highest yield, and Stanley Black & Decker has a balance sheet that continues to strengthen. All four fund their payouts from free cash flow and have raised them steadily for years, making them a solid income core that grows over a long retirement.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
