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Recently, we displayed the performances of mega-cap Industrial stocks and argued that high dividend yielding Industrials offer a better prospect for the near future. The risky mega-cap Industrial stocks with low dividend yields have performed well so far, however investors may be better protected against inflation by picking the defensive stocks with high dividend yields in the current environment.

We believe the same strategy can also be applied to the mid-cap Industrial stocks. As Fed’s monetary policy brings some concerns, investors may tend to play more defensively and look for dividend yielding stocks. Although defensive investing with high dividend stocks doesn’t always bring in the best returns in bull markets, it provides higher resilience in down markets.

We compiled a list of 38 Industrial Stocks (the sector classifications are sourced from Finviz) that have a market cap between $3.5B and $10B and ranked them based on their 12-month dividend yields. The top and bottom halves and their performances are shown below:

HIGHER DIVIDEND YIELDS

Dividend Yield

YTD Return

52-week Return

MDU Resources Group

MDU

2.8%

16.20%

27.7%

Vulcan Materials Company

VMC

2.5%

-7.73%

-20.5%

Masco Corp.

MAS

2.1%

6.51%

-4.6%

Snap-on Inc.

SNA

2.1%

7.48%

37.2%

L-3 Communications Holdings

LLL

2.0%

21.20%

-1.3%

Pentair Inc.

PNR

2.0%

9.00%

17.8%

Martin Marietta Materials Inc.

MLM

1.9%

-5.63%

-4.9%

Fastenal Co.

FAST

1.8%

11.61%

28.8%

The Valspar Corp.

VAL

1.7%

13.55%

24.9%

Rockwell Collins Inc.

COL

1.6%

6.36%

2.9%

Joy Global Inc.

JOYG

1.4%

2.81%

81.2%

IDEX Corp.

IEX

1.4%

15.28%

40.0%

Timken Co.

TKR

1.4%

6.23%

63.1%

DR Horton Inc.

DHI

1.3%

-1.69%

-9.3%

SPX Corp.

SPW

1.2%

14.79%

31.9%

Pall Corp.

PLL

1.2%

11.92%

56.9%

Allegheny Technologies Inc.

ATI

1.1%

21.56%

31.2%

Flowserve Corp.

FLS

1.0%

2.42%

20.6%

Donaldson Company Inc.

DCI

0.8%

3.49%

40.2%

AVERAGE

8.18%

24.40%

LOWER DIVIDEND YIELDS

Dividend Yield

YTD Return

52-week Return

Reliance Steel & Aluminum Co.

RS

0.8%

2.45%

17.2%

Nordson Corp.

NDSN

0.8%

14.00%

54.2%

Waste Connections Inc.

WCN

0.7%

17.01%

36.4%

Leucadia National Corp.

LUK

0.7%

27.28%

66.2%

Ametek Inc.

AME

0.5%

9.85%

52.5%

United States Steel Corp.

X

0.4%

-21.68%

-5.4%

FLIR Systems Inc.

FLIR

0.3%

23.00%

23.8%

Gardner Denver Inc.

GDI

0.2%

18.1%

69.9%

Bucyrus International Inc.

BUCY

0.1%

2.14%

74.8%

Stericycle Inc.

SRCL

0.0%

14.51%

59.6%

AGCO Corp.

AGCO

0.0%

1.30%

73.6%

Mohawk Industries Inc.

MHK

0.0%

18.34%

10.4%

Owens Corning

OC

0.0%

11.91%

3.0%

NVR Inc.

NVR

0.0%

6.14%

8.5%

TransDigm Group Inc.

TDG

0.0%

16.50%

55.3%

Quanta Services Inc.

PWR

0.0%

-2.51%

-12.0%

BE Aerospace Inc.

BEAV

0.0%

2.51%

35.4%

Dresser-Rand Group Inc.

DRC

0.0%

12.19%

47.2%

McDermott International Inc.

MDR

0.0%

1.64%

76.7%

AVERAGE

9.19%

39.33%

In the last 52-week period, the average return of the high dividend yielding mid-cap industrial stocks was 24.40%. The second group of 15 stocks with lower dividend yields performed much better in the same period as we expected, returning 39.33% on average. However, high dividend industrial stocks has been performing just slightly worse than low dividend ones in 2011. The average YTD return of the first group was 8.18%, underperforming the average YTD return of the second group by only 1 percentage point. As the returns of the two groups are comparable this year, it seems now is a good time to switch to high dividend yielding industrial stocks.

Seven mid-cap industrial stocks with the highest dividend yields are as follows:

1. MDU Resources Group (NYSE:MDU): MDU Resources Group is a diversified energy company providing energy distribution and transportation services. MDU has a 2.8% dividend yield and returned 27.7% during the past 12 months. MDU recently traded at $23.24 and gained 16.20% since the beginning of this year. The stock has a market cap of $4.39B and P/E ratio of 18.24. Phill Gross’ Adage Capital Management has the largest position in MDU among 300+ funds we are tracking.

2. Vulcan Materials Company (NYSE:VMC): Vulcan Materials Co. is a US company producing and selling construction materials in the United States. VMC has a 2.5% dividend yield but lost 20.5% during the past 12 months. The stock also performed poorly in 2011, returning -7.73% year-to-date. VMC recently traded at $40.26 and has a market cap of $5.20B. Mason Hawkins’ Southeastern Asset Management had more than $250 Million in VMC. Jean-Marie Evelliard’s First Eagle Investment Management also holds nearly $200M in VCM.

3. Masco Corp. (NYSE:MAS): Masco Corp. is a construction materials company manufacturing and distributing home improvement and building products worldwide. MAS has a 2.1% dividend yield but lost 4.6% during the past 12 months. MAS has performed better this year, gaining 6.51% year-to-date. The stock recently traded at $14.25 and has a market cap of $5.10B. MAS is one of Carl Icahn’s favourite stocks. Erich Mindich’s Eton Park Capital and Ron Gutfleish’s Elm Ridge Capital is also among MAS investors.

4. Snap-on Inc. (NYSE:SNA): Snap-On Inc. is a leading US company producing and marketing tools and equipments. SNA has a 2.1% dividend yield and returned 37.2% during the past 12 months. SNA recently traded at $60.63 and gained 7.48% since the beginning of the year. The stock has a market cap of $3.53B and P/E ratio of 17.22. Jeffrey Ubben’s Valueact Capital had more than $200 Million in SNA.

5. L-3 Communications Holdings (NYSE:LLL): L-3 Communications Holdings is a US company providing defense products and related services worldwide. LLL has a 2.0% dividend yield but lost 1.3% during the past 12 months. LLL performed much better in 2011, returning 21.2% year-to-date. LLL recently traded at $83.53. The stock has a market cap of $8.86B and P/E ratio of 10.13. Boykin Curry’s Eagle Capital Management and Jim Simmons’ Renaissance Technologies had the largest positions in LLL among many hedge funds.

6. Pentair Inc. (NYSE:PNR): Pentair Inc. is a global company providing water treatment, water storage and water movement products and systems worldwide. PNR has a 2.0% dividend yield and returned 17.8% during the past 12 months. The stock also performed well in 2011, returning 9.00% year-to-date. PNR recently traded at $39.01. The stock has a market cap of $3.84B and P/E ratio of 18.15. Harris Associates, Douglas W.Case and Steve Cohen are among PNR investors.

7. Martin Marietta Materials Inc. (NYSE:MLM): Martin Marietta Materials Inc. is a US company providing aggregate and composite materials for the construction industry worldwide. MLM has a 1.9% dividend yield but lost 4.9% during the past 12 months. The stock also lost 5.6% year-to-date. MLM recently traded at $86.28. The stock has a market cap of $3.90B and P/E ratio of 38.12. Mason Hawkins’ Southeastern Asset Management had more than $400 Million in MLM. Jean-Marie Evelliard’s First Eagle Investment Management also holds more than $150M of MLM.

8. Fastenal Co. (NASDAQ:FAST): Fastenal Co. is a US company providing construction and industrial supplies and related services. MLM has a 1.8% dividend yield and returned 28.8% during the past 12 months. The stock also performed well in 2011, returning -11.61% year-to-date. FAST recently traded at $32.85. The stock has a market cap of $4.78B and P/E ratio of 16.53. Brookside Capital and Ron Gutfleish’s Elm Ridge Capital are among FAST investors.

9. The Valspar Corp. (NYSE:VAL): The Valspar Corp. is a large corporation manufacturing and distributing paints and coating worldwide. VAL has a 1.7% dividend yield and returned 24.9% during the past 12 months. The stock also performed well in 2011, returning 13.55% year-to-date. VAL recently traded at $38.97. The stock has a market cap of $3.62B and P/E ratio of 17.70. Andreas Halvorsen’s Viking Global, Matthew Grosman’s Plural Investments and Jean-Marie Eveillard’s First Eagle are among the hedge funds that are bullish about VAL.

10. Rockwell Collins Inc. (NYSE:COL): Rockwell Collins Inc. is a global company providing aviation electronics and related services worldwide. COL recently traded at $61.66 and has a 1.6% dividend yield. COL returned 2.9% during the past 12 months, while it gained 6.36% year-to-date. The stock has a market cap of $9.31B and P/E ratio of 16.12. Alan Fournier’s Pennant Capital Management had more than $100 Million in COL. Jim Simons’ Renaissance Technologies and Phill Gross’ Adage Capital Management also hold COL in their portfolios.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 19 High-Dividend, Mid-Cap Industrials to Consider