Get your dividends elsewhere. General Electric Company (NYSE: GE) is no longer the company it was when most investors bought the stock. Share price is down 73 percent in the past three years, recently dipping…
Get your dividends elsewhere.
General Electric Company (NYSE: GE) is no longer the company it was when most investors bought the stock. Share price is down 73 percent in the past three years, recently dipping below $8. GE has suffered repeated credit and analyst downgrades, earnings misses and guidance cuts. The last remaining silver lining, the stock’s dividend, was just cut for the second time in a year down to just 1 cent per quarter. For all the long-term investors who bought GE looking for a blue-chip dividend play, here are seven industrial dividend stocks Bank of America says are better investments than GE.
Eaton manufactures fluid power systems, automotive systems, electrical controls and truck transmissions. Analyst Andrew Obin says improvements in Eaton’s core business along with earnings per share growth should help the company close its valuation gap with peers. Eaton has lagged the market in 2018, but its 33 percent gain over the past three years is just the type of stable, long-term returns GE investors thought they would be getting. Eaton also has an impressive 3.6 percent dividend. Bank of America has a “buy” rating and $93 price target for ETN stock.
GE investors are justified in being skeptical of another electric company given GE Power’s struggles. However, Emerson Electric has navigated the market just fine in the past three years, producing a 44 percent gain for investors in addition to its 2.9 percent dividend. Emerson divested its network power and electric power businesses in 2016 and now focuses on automation solutions and commercial and residential solutions. Obin says Emerson is on the right track, and the stock’s valuation doesn’t fully reflect its long-term growth opportunity. Bank of America has a “buy” rating and $88 price target for EMR stock.
Lockheed Martin Corp. is the world’s largest defense contractor, with business segments that include aeronautics, missiles and fire control, rotary and mission systems and space systems. Despite concerns over a potential peak in government defense spending and a historically high valuation for LMT stock, analyst Ronald Epstein says the company’s impressive cash flow, track record of solid execution and aggressive capital return program should help support the stock in the coming years. Lockheed has a 2.8 percent dividend. Bank of America has a “buy” rating and $390 price target for LMT stock.
Like GE, 3M has been a U.S. industrial institution for more than a century. However, unlike GE, MMM stock is up 27 percent in the past three years. While GE has cut its dividend to near zero, 3M is a “dividend aristocrat” stock, meaning it has raised its 2.7 percent dividend for at least 25 consecutive years. Obin says the global manufacturing giant’s stable, high-visibility, well-diversified international business could be appealing to investors if market volatility continues. Bank of America has a “buy” rating and $243 price target for MMM stock.
With a forward earnings multiple of just 8.9, Delta stock has one of the lowest valuations in the entire S&P 500 index. Analyst Andrew Didora says much of the valuation discount may be due to concerns over how Delta will weather the next economic downturn. Airlines have historically struggled to maintain profitability during cyclical downturns, but Didora says Delta’s business model is more resilient than at any other time in history. Delta has a 2.4 percent dividend. Bank of America has a “buy” rating and $62 price target for DAL stock.
Following GE’s exit from the Dow Jones Industrial Average earlier this year, United Technologies is one of the three longest-tenured remaining components in the index. United is an industrial conglomerate that is a leading producer of elevators, climate control systems, aircraft engines, aviation controls, and a number of other products. Epstein says he likes United’s rare combination of balanced growth sources, diversified end-market exposure, operating leverage and strong track record of execution. United has a 2.2 percent dividend yield. Bank of America has a “buy” rating and $180 price target for UTX stock.
Dover is a diversified industrial manufacturer that operates in three segments: refrigeration and food equipment, fluids, and engineered systems. Dover recently received a $700 million cash payment for the spin-off of its upstream energy business. In addition to the cash infusion, Obin says the stock’s earnings multiple will likely expand now that Dover’s remaining business is less cyclical in nature. He says margins could also improve and consensus earnings estimates are currently too low. Dover has a 2.2 percent dividend. Bank of America has a “buy” rating and $105 price target for DOV stock.