We have recently released a list of the 12 Best Industrial Dividend Stocks to Invest in Now. This article will examine how Illinois Tool Works Inc. (NYSE: ITW) compares to other top industrial dividend stocks to consider at the moment.
Significance of Industrial Stocks
Industrial stocks are vital for economic growth, covering a diverse array of sectors, including manufacturing and transportation. This sector tends to perform well during periods of economic growth and can benefit from increased government spending on infrastructure projects. Despite the diversity, companies in this sector share many characteristics and are aligned to capitalize on widespread trends. These aspects support the notion that industrials are essential in a well-balanced investment portfolio.
Current Economic Landscape
In recent years, the industrial economy has seen a general improvement in demand trends, although some segments, like manufacturing automation, are experiencing declines. A report from Edward Jones indicated that while recovery is anticipated to persist, there are several short-term uncertainties that could affect sector growth, including a potential economic slowdown, ongoing geopolitical issues, and declining confidence among businesses and consumers.
Risks from Global Trade Tensions
Additionally, the increasing risk of a global trade dispute, particularly between the U.S. and major trade partners, has added to the uncertainty within the industrial sector. The administration has imposed tariffs on various materials such as steel and aluminum, with the full effects of these tariffs yet to be seen. Further tariff actions are expected, likely focusing on China and the European Union, which may retaliate with their own tariffs or policies.
Performance Overview of 2024
In 2024, the industrial sector yielded solid returns overall, though it slightly lagged behind the broader market during a generally strong year for stocks. According to a Fidelity Investments report, industrials began the year robustly, managing to keep pace with the market until April. However, the sector underperformed in May and June before recovering in July, proving to be one of the stronger market segments. This uneven performance demonstrates a mix of optimism about a potential soft economic landing and concerns over weak manufacturing metrics and high stock valuations.
Investment Opportunities and Trends
The Fidelity report also pointed out key themes that could unveil investment opportunities in the upcoming year. A significant theme is the revival of U.S. manufacturing, driven by various factors, including heightened investment in domestic infrastructure and efforts to bring supply chains back home to mitigate geopolitical threats, as well as increased capital for electrification and AI development.
Illinois Tool Works Inc. (ITW) Analysis
Illinois Tool Works Inc. (NYSE: ITW) is a diversified industrial enterprise spanning seven critical segments, including automotive manufacturing, construction products, and electronics. In 2024, the company dedicated around $800 million to stimulate long-term growth and innovation within its core business sectors. In Q4 2024, ITW reported revenues of $3.9 billion, a decrease of 1.28% compared to the previous year, though its GAAP earnings per share rose 7% to $2.54.
Currently, Illinois Tool Works offers a quarterly dividend of $1.50 per share, yielding 2.34%, and has maintained its dividend growth for 52 consecutive years. ITW ranks 8th on our list of the best industrial dividend stocks to consider now. While we recognize ITW’s investment potential, we believe other undervalued dividend stocks may offer higher returns in a shorter timeframe.
Disclosure: None. This article was originally published at Insider Monkey.
