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A long history of dividend increases is a sign of a strong company. Stocks with several decades of dividend growth under their belts have stood the test of time. They have proven to have durable competitive advantages, and the ability to navigate recessions.
When investors think of dividend stocks, the utility sector probably comes to mind. But for investors interested in high dividend growth rates, the industrials sector is better. The following three industrial dividend stocks have long histories of dividend increases, and raise their dividends at high rates.
Top Industrial Dividend Stocks: 3M (NYSE: MMM)
3M is one of the best dividend growth stocks in the Dow. It has increased its dividend for 59 years in a row. It has maintained this streak thanks to its massive size and scale. 3M is an industrial giant. It serves multiple sectors, including health care, safety and graphics, electronics, and consumer products. It generates more than $30 billion in annual revenue. Earnings increased 8% last year, thanks mostly to cost improvements.
Sales increased 4% last quarter, excluding currency exchange, as 3M realized growth in all five business segments. 3M’s future growth will be shaped by its electronic and energy segment, which grew 8% last quarter. In addition, its industrial and safety segments each grew by 3%.
The company is also growing in the international markets, particularly in the emerging markets. Revenue in Asia-Pacific rose 8% last quarter. 3M is generating high growth from China and elsewhere, which should continue for the foreseeable future.
With its massive profits, 3M returns a great deal of cash to shareholders. The company returned more than $1 billion to investors last quarter alone, through dividends and share repurchases. 3M has a current yield of 2.3%.
Top Industrial Dividend Stocks: Dover (NYSE: DOV)
Last but not least is Dover, which has increased its dividend for over 60 years in a row. It recently raised its dividend by 7%. Dover manufactures equipment and components used in a variety of industries such as food and energy.
Dover is a play on rising commodity prices, because it caters heavily to the oil and gas industry. Declining commodity prices weighed on Dover in 2015 and 2016, but it is off to a much better start this year. Revenue increased 15% through the first six months. Earnings jumped by more than 50%, thanks to more rig counts brought back into service. Management expects at least 10% revenue growth for 2017.
After a tough year in 2016, Dover is back to growth. The stock has responded, by returning 14% year-to-date. Continued earnings growth means another dividend increase next year is highly likely. It has a 2.2% current dividend yield.
Top Industrial Dividend Stocks: Emerson Electric (NYSE: EMR)
Emerson Electric has also increased its dividend each year for the past six decades. As industrial dividend stocks go, this has been one of the steadiest dividend growth stocks for many years, despite operating in a cyclical industry. Emerson’s stability is because the company knows how to navigate difficult climates.
Emerson shares have lagged the S&P 500 so far this year, as the company is in the middle of a lengthy turnaround. It divested its large network and electric power businesses for more than $5 billion. It has taken the proceeds and reinvested in its core competencies, which include automation, and heating and air conditioning services.
The restructuring also allowed the company to significantly reduce costs. The combination has led to strong growth rates this year. For example, Emerson’s revenue and operating cash flow increased 10% and 23%, respectively, last quarter. The company expects 5% revenue growth for 2017.
Emerson has an attractive current dividend yield of 3.2%. This is about 50% higher than the average dividend yield in the S&P 500.
The Bottom Line
Dividend growth stocks reward shareholders with rising income streams each year. Traditional dividend stock holdings like utilities raise their dividends regularly, but typically at low-single digit rates. By comparison, the three stocks mentioned above are much stronger for dividend growth.
High dividend increases of 10% and above, hold high appeal for those with long investing time horizons. Dividend growth investors should take a closer look at all three of these industrial dividend stocks: 3M, Emerson Electric and Dover.