Dividend Champions: Focus on Industrials

The Dividend Champions spreadsheet and PDF have been updated through 2/28/11 and are available here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. Together, all of these companies may be referred to using the abbreviation “CCC.”

This is the eighth in a series of articles focusing on specific industries and isolating the CCC companies within those industries. The first seven can be found under my articles page, beginning on March 2.

Basic Industry and More

Industrial companies could be called the backbone of any economy. They cover a broad spectrum from office supplies to jet fighters and from excavating equipment to packaging materials. A simple way to understand their breadth would be to say that they represent the entire business-to-business universe, producing the products and services that other firms must have to do their own business.

Although there is some overlap with the individual consumer market, most of the output from these companies is sold to other companies, often to be used as part of other products or in producing other products. So a conglomerate like 3M Company (MMM) may make Scotch tape and Post-It Notes that end up in consumer hands, most individuals are unlikely to buy jet engines or helicopters made by United Technologies (UTX), nor are they likely to order Caterpillar (CAT) bulldozers or defense electronics from Lockheed Martin (LMT).

For this article, I'm including all the industrial stocks not covered in earlier articles in this series. So, although some might classify the aerospace/defense sector as an industry worthy of its own article, as just one example, I'm covering such sectors under the broad term of Industrials. Most of the companies included also share similar characteristics in terms of dividend yield and earnings-related ratios. I'm combining three types of Equipment companies as one group, but the number of Machinery and Business Services firms is a good clue about the nature of our economy. The market capitalization of these companies varies from just $31 million (Acme United (ACU)) to over $65 billion (Caterpillar and 3M), with the largest average coming from Conglomerates, Aerospace, and Equipment and the smallest coming from Packaging, Electronics, and the Miscellaneous groups.

The Companies

Industrials make up a large segment of the CCC universe, with 75 firms. Although many of these stand out because of their long histories of dividend increases, the average yield is a full percentage point below the CCC universe, at 1.91%. Fortunately, there is still a wide array of companies with higher yields and larger dividend growth rates, and most of those listed are American companies with substantial foreign operations. Once again, I'm including as many columns of data as is practical, from a perspective of width and significance.

			No.	2/28		%	Payout	TTM	NY%	MktCap	DGR	DGR
Company	Symbol	Industry	Yrs	Price	Yield	Inc.	%Ratio	P/E	Growth	($Mil)	5-yr	10-yr
General Dynamics	GD	Aerospace	19	76.12	2.21	10.53	24.67	11.18	7.40	28,370	16.0	12.4
L-3 Communications	LLL	Aerospace	8	79.29	2.27	12.50	21.82	9.61	5.46	8,880	26.2	n/a
Lockheed Martin	LMT	Aerospace	8	79.16	3.79	19.05	37.78	9.97	24.21	27,390	20.2	19.6
Northrop Grumman	NOC	Aerospace	7	66.68	2.82	9.30	27.57	9.78	7.97	19,420	12.7	8.7
Raytheon Company	RTN	Aerospace	6	51.21	2.93	20.97	31.25	10.67	11.85	18,420	10.8	111.5
Averages for	5	Aerospace	9.6	70.49	2.80	14.47	28.62	10.24	11.38	20,496	17.2	38.1
Diebold Inc.	DBD	Bus. Equip.	58	35.16	3.19	3.70	-361.29	-113.42	9.48	2,310	5.7	5.7
Matthews International	MATW	Bus. Equip.	16	37.15	0.86	14.29	13.73	15.94	10.57	1,100	9.4	11.6
Pitney Bowes Inc.	PBI	Bus. Equip.	29	25.18	5.88	1.37	104.96	17.86	-0.43	5,120	3.3	2.5
Raven Industries	RAVN	Bus. Equip.	24	54.26	1.18	14.29	29.77	25.24	8.26	980	18.5	18.2
Deere & Company	DE	Farm Equip.	8	90.15	1.55	16.67	28.11	18.10	16.12	37,950	13.9	10.2
Lindsay Corp.	LNN	Farm Equip.	8	70.61	0.48	6.25	18.99	39.45	23.98	886	7.5	9.0
A.O. Smith Corp.	AOS	Indus. Equip.	17	40.40	1.39	7.69	23.14	16.69	19.32	1,870	4.8	4.9
Badger Meter Inc.	BMI	Indus. Equip.	18	39.31	1.42	16.67	29.32	20.58	12.68	587	12.4	9.2
Caterpillar Inc.	CAT	Indus. Equip.	17	102.93	1.71	4.76	42.41	24.80	29.77	65,750	13.6	10.0
Donaldson Company	DCI	Indus. Equip.	24	56.30	0.92	4.00	20.72	22.43	14.71	4,370	12.1	13.3
Emerson Electric	EMR	Indus. Equip.	54	59.66	2.31	2.99	47.26	20.43	17.38	44,990	9.8	6.4
Franklin Electric Co.	FELE	Indus. Equip.	18	42.50	1.22	4.00	31.90	26.07	23.12	986	6.3	9.1
Met-Pro Corp.	MPR	Indus. Equip.	10	11.41	2.31	10.00	69.47	30.03	26.83	167	6.6	6.2
Parker-Hannifin Corp.	PH	Indus. Equip.	54	89.18	1.44	10.34	24.62	17.15	13.30	14,440	13.3	9.0
Pentair Inc.	PNR	Indus. Equip.	35	37.08	2.16	5.26	40.20	18.63	17.17	3,650	7.9	8.9
Roper Industries Inc.	ROP	Indus. Equip.	18	84.13	0.52	15.79	13.17	25.19	13.85	7,980	12.6	10.5
Averages for	16	Equipment	25.5	54.71	1.78	8.63	11.03	14.07	16.01	12,071	9.9	9.0
ABM Industries Inc.	ABM	Bus. Services	44	26.63	2.10	3.70	45.90	21.83	16.78	1,400	5.2	5.7
Accenture plc	ACN	Bus. Services	5	51.48	1.60	10.00	29.46	18.39	11.71	32,980	22.4	n/a
American Greetings	AM	Bus. Services	7	21.65	2.59	16.67	25.57	9.89	20.09	869	12.5	-4.1
Automatic Data Proc.	ADP	Bus. Services	36	50.00	2.88	5.88	59.50	20.66	8.03	24,820	17.0	14.5
Brady Corp.	BRC	Bus. Services	25	35.74	2.01	2.86	39.78	19.75	10.92	1,890	8.9	7.4
Cass Information Sys.	CASS	Bus. Services	9	39.05	1.64	14.29	29.77	18.16	n/a	367	10.5	7.6
Cintas Corp.	CTAS	Bus. Services	28	28.12	1.74	2.08	33.56	19.26	15.82	4,090	8.4	9.9
G&K Services Inc.	GKSR	Bus. Services	5	32.42	1.17	26.67	19.49	16.63	12.66	606	37.2	17.1
Harsco Corp.	HSC	Bus. Services	16	34.17	2.40	2.50	1025.00	427.13	51.13	2,750	6.4	5.7
Healthcare Services Gp	HCSG	Bus. Services	9	17.77	3.52	0.59	122.55	34.84	14.29	1,180	37.2	n/a
Jack Henry & Assoc.	JKHY	Bus. Services	19	31.91	1.32	10.53	27.81	21.13	10.26	2,750	16.1	14.3
Landauer Inc.	LDR	Bus. Services	9	62.90	3.50	2.23	84.94	24.29	12.55	592	4.8	4.4
McGrath Rentcorp	MGRC	Bus. Services	19	27.51	3.34	2.22	67.65	20.23	8.28	659	11.0	12.7
National Research Corp.	NRCI	Bus. Services	7	32.71	2.69	15.79	69.84	25.96	n/a	218	18.9	n/a
Ritchie Brothers Auct.	RBA	Bus. Services	8	25.50	1.65	5.00	67.74	41.13	24.68	2,690	16.2	n/a
Robert Half International	RHI	Bus. Services	8	31.90	1.76	7.69	127.27	72.50	54.17	4,670	13.2	n/a
Rollins Inc.	ROL	Bus. Services	9	19.62	1.43	16.67	45.90	32.16	10.29	2,890	22.0	19.8
VSE Corp.	VSEC	Bus. Services	7	27.11	0.89	20.00	5.19	5.87	5.01	141	14.9	11.0
Averages for	18	Bus. Services	15.0	33.12	2.12	9.19	107.05	47.21	17.92	4,753	15.7	9.7
3M Company	MMM	Conglomerate	53	92.23	2.39	4.76	39.08	16.38	11.76	65,650	4.6	6.1
Crane Company	CR	Conglomerate	6	47.24	1.95	15.00	35.52	18.24	15.54	2,750	13.8	8.0
PPG Industries Inc.	PPG	Conglomerate	39	88.38	2.49	1.85	47.52	19.09	10.81	14,190	3.2	3.1
United Technologies	UTX	Conglomerate	16	83.54	2.03	10.39	35.86	17.62	14.23	76,890	14.1	15.2
Averages for	4	Conglomerate	28.5	77.85	2.21	8.00	39.49	17.83	13.08	39,870	8.9	8.1
Daktronics Inc.	DAKT	Electronics	6	11.45	0.87	5.26	-111.11	-127.22	40.63	475	14.9	n/a
Regal Beloit Corp.	RBC	Electronics	6	72.95	0.93	6.25	17.71	19.00	19.57	2,820	5.7	3.2
Watsco Inc.	WSO	Electronics	9	64.58	3.22	8.33	83.53	25.94	24.51	1,980	26.9	35.2
W.W. Grainger Inc.	GWW	Electronics	39	133.21	1.62	17.39	31.17	19.22	12.01	9,240	17.7	12.0
Averages for	4	Electronics	15.0	70.55	1.66	9.31	5.33	-15.77	24.18	3,629	16.3	16.8
Comfort Systems USA	FIX	Indus. Goods	6	13.27	1.51	11.11	45.45	30.16	24.32	502	51.6	n/a
ITT Corp.	ITT	Indus. Goods	8	57.93	1.73	17.65	23.20	13.44	7.97	10,680	22.7	12.8
MSC Industrial Direct	MSM	Indus. Goods	8	63.19	1.39	10.00	33.59	24.12	20.85	4,010	12.8	n/a
Valmont Industries	VMI	Indus. Goods	9	102.08	0.65	3.13	18.49	28.59	23.75	2,670	13.8	9.3
Averages for	4	Indus. Goods	7.8	59.12	1.32	10.47	30.18	24.08	19.22	4,466	25.2	11.0
Cummins Inc.	CMI	Machinery	5	101.12	1.04	50.00	19.89	19.15	21.42	19,790	23.9	11.3
Dover Corp.	DOV	Machinery	55	64.25	1.71	5.77	29.73	17.36	13.24	11,990	10.1	8.3
Flowserve Corp.	FLS	Machinery	5	124.97	1.02	10.34	18.60	18.16	16.12	6,960	n/a	n/a
Gorman-Rupp Company	GRC	Machinery	37	37.33	1.13	5.00	27.10	24.08	14.29	627	7.9	5.2
Graco Inc.	GGG	Machinery	14	40.71	2.06	5.00	49.70	24.09	19.80	2,450	9.0	17.0
Illinois Tool Works	ITW	Machinery	47	54.10	2.51	9.68	44.88	17.85	16.45	26,870	16.8	13.1
Lincoln Electric Holdings	LECO	Machinery	16	71.38	1.74	10.71	40.52	23.33	21.50	3,000	9.2	7.2
Nordson Corp.	NDSN	Machinery	47	108.91	0.77	10.53	15.38	19.95	10.02	3,710	3.9	4.1
Pall Corp.	PLL	Machinery	7	54.36	1.29	9.38	33.65	26.13	13.74	6,280	9.9	-0.3
Robbins & Myers Inc.	RBN	Machinery	5	42.63	0.42	5.88	14.17	33.57	19.91	1,410	9.1	4.4
Tennant Company	TNC	Machinery	39	40.65	1.67	21.43	53.54	32.01	30.59	772	6.0	4.2
NACCO Industries	NC	Machinery	25	124.55	1.68	0.97	20.82	12.41	44.95	1,040	2.4	8.9
Averages for	12	Machinery	25.2	72.08	1.42	12.06	30.67	22.34	20.17	7,075	9.8	7.6
AptarGroup Inc.	ATR	Packaging	17	48.17	1.49	20.00	29.03	19.42	9.39	3,230	13.5	20.8
Bemis Company	BMS	Packaging	28	32.85	2.92	4.35	51.89	17.76	11.67	3,540	5.0	6.7
Greif Inc. A	GEF	Packaging	7	64.66	2.60	10.53	46.93	18.06	11.79	3,050	32.0	19.9
Silgan Holdings Inc.	SLGN	Packaging	8	36.48	1.21	4.76	23.28	19.30	10.98	2,680	16.0	n/a
Sonoco Products Co.	SON	Packaging	27	36.08	3.10	3.70	57.14	18.41	9.92	3,720	3.8	3.5
Averages for	5	Packaging	17.4	43.65	2.27	8.67	41.65	18.59	10.75	3,244	14.1	12.7
Fastenal Company	FAST	Bldg Material	12	62.13	1.61	19.05	55.56	34.52	19.64	9,160	22.1	45.3
Universal Forest Prod.	UFPI	Bldg Material	16	34.10	1.17	233.33	44.94	38.31	31.72	655	30.7	17.5
Acme United Corp.	ACU	Off. Supply	7	10.05	2.39	20.00	25.00	10.47	17.05	31	16.0	n/a
Texas Pacific Land Trust	TPL	R.E. Develop.	6	45.19	0.46	5.00	17.95	38.62	n/a	435	n/a	9.6
Carlisle Companies	CSL	Plastics	34	43.01	1.58	6.25	29.06	18.38	17.73	2,620	6.6	5.7
MOCON Inc.	MOCO	Sci. Instr.	9	13.07	3.06	5.26	51.28	16.76	n/a	69	6.0	5.7
Nucor Corp.	NUE	Steel & Iron	38	47.96	3.02	0.69	345.24	114.19	46.64	15,170	36.9	25.4
Averages for	7	Misc.	17.4	36.50	1.90	41.37	81.29	38.75	26.56	4,020	19.7	18.2
Averages for	75	Industrials	19.2	53.24	1.91	12.86	49.22	24.84	17.66	9,364	14.0	12.2
Averages for	447	CCC Co's	16.7	47.91	2.91	8.20	68.18	21.94	12.39	16,745	12.5	10.3

Summary

Industrial stocks include many with long histories of annual increases, but their generally lower yields are a reminder of their similarity to broader indices, like the S&P 500, which are often dominated by such firms. Like the CCC universe in general, each sub-group offers some exceptional choices for portfolio diversification. I welcome feedback in the Comments section below.

Next Up: Consumer Discretionary stocks.

Disclosure: I am long LMT, RTN, DE, CAT, PNR, MMM, UTX, DOV, ITW, TNC, BMS.