For income investors looking for strong dividend stocks, the S&P 500 Dividend Aristocrats are a great place to start. The Dividend Aristocrats are a group compiled by Standard & Poor’s that spotlights companies that have increased their dividends for at least 25 consecutive years.
This is an exclusive list that helps investors narrow down the huge number of dividend payers in the stock market. Maintaining such a long track record of raising dividends is a clear sign of a strong business that can stand the test of time.
It’s very impressive that some companies can continue to increase shareholder distributions, even when the economy goes into recession.
Within the Dividend Aristocrats list, there are three stocks in the industrial sector that investors should know about. These are Emerson Electric (NYSE: EMR), 3M (NYSE: MMM) and Dover Corp. (NYSE: DOV).
These three companies truly have amazing track records of rewarding shareholders each and every year. And, they each offer market-beating dividend yields.
First, Emerson Electric has increased its dividend for 58 years in a row. And, thanks to its 10% decline in the past year, Emerson now offers a tempting 3.1% dividend yield.
This year, Emerson Electric will celebrate its 125th anniversary as a company. This places Emerson in elite company, and demonstrates that the business can stand the test of time. This is a useful reminder for the challenging times Emerson currently finds itself in.
Last quarter, Emerson’s revenue fell 7% and adjusted earnings per share fell 16%. This is obviously poor performance, and the two core factors were the strong U.S. dollar and the plunge in commodity prices. Emerson suffered a 3% decline in sales in its process management business, and a 16% sales decline in industrial automation. Order rates declined in these businesses because of the rapid reduction in global oil and gas spending activity.
But better days lie ahead, because underlying demand rose 6% in Asia, 3% in the Middle East and Africa, and 7% in Europe last quarter. For the full year, Emerson expects up to 2% revenue growth, which is admirable performance in such a difficult operating climate.
Behind the Post-it Notes
3M, originally known as Minnesota Mining and Manufacturing, has a long and proud history. It’s paid dividends to its shareholders without interruption for more than 98 years and increased the annual dividend for 57 consecutive years.
3M has richly rewarded shareholders for many years. The stock is up 44% over the past two years, and strongly outperformed the broader market, which returned 27% in the same time. And, it currently pays an attractive 2.6% dividend.
Investors might associate 3M with Post-it Notes and Scotch tape, but the company’s health care and electronics businesses power its growth. These two businesses posted organic revenue growth of 3% and 5.8%, respectively, last quarter. 3M generates a lot of cash, and returned $1.5 billion to investors last quarter in combined dividends and share repurchases.
Dover Profits Despite Headwinds
Dover is right on par with its rivals, as this diversified industrial manufacturer has increased its own dividend for 59 consecutive years. It has done this because of its strong business. Last year, Dover grew revenue by 8% and adjusted earnings per share by 10%.
This year, Dover is off to a tougher start, for the same reasons as Emerson. Revenue fell 5% year over year, but through little fault of its own. The strengthening U.S. dollar and the collapse in oil prices were two very stiff headwinds for Dover, which it could not control.
Dover has a large energy business, which accounts for one-quarter of its total revenue. But the company is still strongly profitable, and uses a lot of its profits to reward shareholders. The stock currently pays a 2.2% dividend, and Dover recently announced a new 15 million share repurchase program. This buyback plan will help boost earnings per share until the various headwinds ease.
The key takeaway is that while markets rise and fall, and the economy expands and contracts, these three Dividend Aristocrats continue to steadily increase their dividends. Emerson, 3M, and Dover are each Dividend Aristocrats (more than twice over) and offer market-beating dividend yields. For investors looking to add an industrial stock to their portfolios, these three are a great place to begin your research.
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