After healing from the pandemic lows, deepening supply chain constraints due to escalating sanctions on Russia, labor shortages, and rising commodity prices have significantly affected the industrial sector this year. Moreover, the impact of high inflation on manufacturing to distribution and concerns over an upcoming recession could trouble the industry further.
However, strong demand for industrial goods and favorable government policies to support the domestic industrial sector should help companies in this space stay afloat. The May Manufacturing PMI registered 56.1%, up 0.7% from the prior month.
Given the sector’s solid rebound potential and the current market volatility, investors could consider buying dividend-paying industrial stocks Raytheon Technologies Corporation (RTX), ABB Ltd (ABB), United Parcel Service, Inc. (UPS), Emerson Electric Co. (EMR), and Fastenal Company (FAST), which possess strong fundamentals. These stocks are rated Buy in our proprietary POWR Ratings system.
Raytheon Technologies Corporation (RTX)
RTX provides advanced systems and services worldwide for commercial, military, and government customers. The company operates through four segments — Collins Aerospace Systems; Pratt & Whitney; Raytheon Intelligence & Space; and Raytheon Missiles & Defense. It focuses on technology offerings and engineering teams to deliver innovative solutions that include aerostructures, avionics, interiors, mechanical systems, mission systems, aircraft engines, power and control systems, radars, software, and other products.
On May 27, 2022, RTX’s Raytheon Missiles & Defense business was awarded a $624 million U.S. Army contract to produce 1,300 Stinger missiles, a lightweight, self-contained air defense system with supersonic speed, agility, and highly accurate guidance and control system. The contract is being funded from the Ukraine Supplemental, which contains emergency funding to support Ukrainian defense forces. This foreign military sale order should help benefit RTX substantially.
RTX will pay a $0.55 quarterly cash dividend on September 8, 2022. The stock pays a $2.20 per share dividend annually, translating to a 2.39% yield. The company’s dividend has grown at a 4.6% rate over the past five years.
For its fiscal year 2022 first quarter ended March 31, 2022, RTX’s net sales increased 3.1% year-over-year to $2.07 billion. The company’s adjusted operating profit came in at $1.90 billion, up 18.9% from the prior-year period. RTX’s adjusted net income came in at $1.72 billion, indicating a 25.8% year-over-year improvement. And its adjusted EPS increased 27.8% year-over-year to $1.15. RTX had cash and cash equivalents of $6.04 billion as of March 31, 2022.
Analysts expect the company’s EPS to improve 11.9% year-over-year to $4.78 for fiscal 2022 ending December 31, 2022. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $68.34 billion for the same fiscal year represents a 6.1% rise from the prior-year period. The company’s EPS is expected to grow at a 16.2% rate per annum over the next five years. Over the past month, the stock has lost 0.7% to close yesterday’s trading session at $91.32.
RTX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B grade for Stability. Click here for the additional ratings for RTX’s Growth, Value, Quality, and Momentum. RTX is ranked #14 of 77 stocks in the Air/Defense Services industry.
ABB Ltd (ABB)
Based in Switzerland, ABB manufactures and sells electrification, industrial automation, and robotics and motion products for utilities, industry and transport, and infrastructure customers. The company serves automotive, buildings and infrastructure, metals, chemical, data centers, food and beverage, process automation, life sciences, marine and ports, mining, energy, and utility industries.
On June 1, 2022, Poland-based petroleum refineries company PKN Orlen selected ABB, along with South Korea-based Hyundai Engineering Co. (HEC) and Spain-based engineering, procurement, and construction company Técnicas Reunidas, to install their distributed control system (DCS) ABB Ability System 800xA at its new Olefin III complex. This system will enable PKN Orlen to constantly monitor and analyze plant productivity, manage power consumption, ensure product quality, and optimize process efficiency in real-time.
ABB pays a $0.88 per share dividend annually, translating to a 3.18% yield. ABB’s revenues for its fiscal 2022 first quarter ended March 31, 2022, increased marginally from the prior-year period to $6.97 billion. The company’s gross profit came in at $2.28 billion, indicating a marginal improvement from the year-ago period. Its income from operations came in at $857 million, representing a 7.5% year-over-year improvement. ABB’s net income came in at $604 million, up 20.3% from the prior-year period. Its EPS increased 24% year-over-year to $0.31. The company had $5.22 billion in cash and equivalents as of March 31, 2022.
The consensus EPS estimate of $1.59 for fiscal 2022 ending December 31, 2022, represents an 8.9% rise from the prior-year period. It surpassed consensus EPS estimates in three of the trailing four quarters. Analysts expect the stock’s revenue to rise 3.4% year-over-year to $29.93 billion for the same fiscal year. ABB’s EPS is expected to grow at a rate of 14.6% per annum over the next five years. Over the past month, the stock has lost 4.4% to close yesterday’s trading session at $27.54.
ABB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Stability and Quality. Click here to see the additional ratings for ABB’s Sentiment, Growth, Value, and Momentum. ABB is ranked #20 of 78 stocks in the Industrial - Machinery industry.
United Parcel Service, Inc. (UPS)
UPS provides worldwide letter and package delivery, transportation, logistics, and financial services. The company operates through three segments – U.S. Domestic Package; International Package; and Supply Chain & Freight. Its services include ground freight, ocean freight, air freight, customs brokerage, and insurance.
On May 26, 2022, UPS and InterGlobe Enterprises, a large Indian conglomerate engaged in providing aviation, hospitality, and travel-related services, announced a joint venture to launch MOVIN, a new logistics brand that offers extensive express and premium service coverage across India. The surging demand for robust logistics solutions should allow MOVIN to provide efficiencies, stronger distribution channels, advanced technology, and global best practices. This should enable both companies to gain reach in the fast-paced Indian market.
UPS pays a $6.08 per share dividend annually, translating to a 3.49% yield. The company’s dividend has grown at a 9.6% rate over the past five years.
UPS’ total revenue increased 6.4% year-over-year to $24.38 billion in its fiscal 2022 first quarter ended March 31, 2022. The company’s non-GAAP operating profit came in at $3.31 billion for the quarter, up 12.1% from the prior-year period. While its non-GAAP net income increased 10.3% year-over-year to $2.68 billion, its non-GAAP EPS increased 10.1% to $3.05. As of March 31, 2022, the company had $12.21 billion in cash and cash equivalents.
The consensus EPS estimate of $12.74 for fiscal 2022 ending December 31, 2022, represents a 5% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to be $102.13 billion for the same fiscal year, indicating a 5% rise from the prior-year period. The company is expected to grow at a 14.1% rate per annum over the next five years. Over the past month, the stock has lost 2.2% to close yesterday’s trading session at $174.16.
UPS’ POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for UPS’ Growth, Momentum, Sentiment, and Value here. UPS is ranked #5 of 17 stocks in the Air Freight & Shipping Services industry.
Emerson Electric Co. (EMR)
EMR designs and manufactures electronic and electrical equipment, software, systems, and services. The company offers products for industrial, commercial, and consumer markets worldwide through its network power, process management, industrial automation, climate technologies, and commercial and residential solutions divisions.
On June 6, 2022, EMR launched its new AVENTICS Series Servo Profile Advanced (SPRA) Electric Actuators, a line of precise and highly repeatable rod-style cylinders that offers a precision ball screw, a cost-effective lead screw option, and roller screws for precision, speed and heavy loads. These electric actuators providing exceptional durability and accuracy and improved sustainability or efficiency should witness increasing market reach.
EMR pays a $2.06 per share dividend annually, translating to a 2.43% yield. The company’s dividend has grown at a 1.4% rate over the past five years.
EMR’s net sales for its fiscal 2022 second quarter ended March 31, 2022, increased 8.1% year-over-year to $4.79 billion. The company’s adjusted EBITA came in at $967 million, representing an 8.9% rise from the year-ago period. While its net earnings increased 18.8% year-over-year to $675 million, its adjusted EPS grew 20.6% to $1.29. As of March 31, 2022, the company had $6.93 billion in cash and equivalents.
Analysts expect the company’s EPS to be $5.04 for fiscal 2022 ending September 30, 2022, representing a 22.9% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $19.82 billion for the same fiscal year represents an 8.7% year-over-year improvement. EMR’s EPS is expected to grow at a 10.3% rate per annum over the next five years. Over the past month, the stock has gained 1.2% to close yesterday’s session at $84.70.
EMR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has a B grade for Quality, Stability, and Sentiment. Click here to see the additional ratings for EMR (Momentum, Value, and Growth). The stock is ranked #23 of 92 in the Industrial - Equipment industry.
Fastenal Company (FAST)
FAST engages in the wholesale distribution of industrial and construction supplies internationally. The company offers fasteners and related industrial and construction supplies under the Fastenal name. It serves farmers, truckers, railroads, mining companies, retail trades, oil exploration, production, refinement companies, manufacturing and non-residential construction markets, and federal, state, and local governmental entities.
In May 2022, FAST generated net sales of $589.21 million, up 23.5% from the year-ago period. The company pays a $1.24 per share dividend annually, translating to a 2.52% yield. The company’s dividend has grown at a 13.7% rate over the past five years.
FAST’s fiscal 2022 first-quarter net sales increased 20.3% year-over-year to $1.70 billion. The company’s gross profit came in at $793.30 million, up 23.3% from the prior-year period. Its operating income came in at $358 million for the quarter, representing a 27.7% rise from the year-ago period. While its net income increased 28% year-over-year to $269.60 million, its EPS grew 27% to $0.47. As of March 31, 2022, the company had $234.20 million in cash and cash equivalents.
Analysts expect FAST’s EPS to be $1.88 for fiscal 2022 ending December 31, 2022, representing a 5.9% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $6.93 billion in the same fiscal year represents a 15.2% year-over-year improvement. FAST’s EPS is expected to grow at a rate of 6.3% per annum over the next five years. Over the past month, the stock has lost 6.8% to close yesterday’s trading session at $49.13.
FAST’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth, Stability, and Momentum. Click here to see the additional ratings for FAST’s Value and Sentiment. FAST is ranked #32 in the Industrial - Equipment industry.
RTX shares were trading at $92.42 per share on Wednesday afternoon, up $1.10 (+1.20%). Year-to-date, RTX has gained 8.63%, versus a -19.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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