Even in a bull market environment, a list of the best industrial stocks to buy now is hardly as interesting as a list of high-flying technology or health care companies. Most investors love the flash of a cybersecurity leader or a biotechnology startup and think that most industrial stocks are boring laggards not worth their time.
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Industrials as a sector group only make up about 8.5% of the entire S&P 500 index by weight. But if you’re interested in a well-rounded portfolio that exhibits less volatility than a “risk on” portfolio focused on high-growth companies, they provide an important foundation to any long-term strategy.
The following 10 industrial stocks all have pretty impressive performance, and a few offer generous dividends on top of that.
| Stock | Forward dividend yield (as of Aug. 14) |
| A.O. Smith Corp. (ticker: AOS) | 1.7% |
| Cummins Inc. (CMI) | 2.8% |
| Eaton Corp. PLC (ETN) | 1.6% |
| FedEx Corp. (FDX) | 1.9% |
| Flowserve Corp. (FLS) | 2% |
| The Manitowoc Co. Inc. (MTW) | None |
| Masco Corp. (MAS) | 1.9% |
| Owens Corning (OC) | 1.5% |
| Parker-Hannifin Corp. (PH) | 1.4% |
| Watsco Inc. (WSO) | 2.7% |
A.O. Smith Corp. (AOS)
A.O. Smith is a roughly $11 billion manufacturer of residential and commercial heat pumps, water heaters and pool systems. It does about three quarters of its business in North America but also serves China, Europe and India. In July, A.O. Smith reported record earnings per share after a 28% surge in profits, even though revenue was largely flat year-over-year. That’s thanks to strong demand that allows for better pricing power, along with well-run operations. AOS also increased its full-year guidance as a sign of continued confidence.
Dividend yield: 1.7%
Cummins Inc. (CMI)
Cummins has been an icon of the truck industry for a century, and is synonymous with best-in-class diesel engines. It has also grown to specialize in natural gas, electric and hybrid powertrains on top of this legacy business as well as other engines used in things such as generators and standby power systems. The company was recently trading at new 52-week highs at the beginning of August, and while disappointing earnings that featured narrower margins have weighed on the stock since then, it’s still a dominant, $35 billion industrial stock with a bright future. It’s also riding about 20 years of consecutive dividend increases, with its August announcement of a $1.68 dividend pushing distributions up to 115% more than the 78 cents it was paying back in 2015.
Dividend yield: 2.8%
Eaton Corp. PLC (ETN)
This diversified industrial stock operates as a power management company worldwide, providing electrical components, power distribution products and related materials to a host of industries. That includes the obvious applications in utility and energy sectors, but also automobile and airplane components. In fact, Eaton is an integral part of the electric vehicle supply chain. Its diversified operations cover 175 different countries and generated more than $20 billion in annual revenue last year. That top-line figure is growing, too, with projected revenue expansion of more than 10% in fiscal 2023.
Dividend yield: 1.6%
FedEx Corp. (FDX)
While roughly half the size of rival logistics company United Parcel Service Inc. (UPS), FedEx is nevertheless a $70 billion powerhouse in the package delivery game. And while top line growth is not exactly setting the world on fire, strong management and a move to focus on efficiencies has helped drive up profitability as of late. FDX is expected to earn $21.60 in earnings per share next fiscal year — up more than 23% over this year’s projected earnings. Shares have surged more than 50% so far in 2023 thanks to this strong outlook.
Dividend yield: 1.9%
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Flowserve Corp. (FLS)
Flowserve is one of the best industrial stocks to buy given its dominance in specialty products related to flow controls, seals and valves. Whether it’s providing high-speed compressors for gas pipelines, automation solutions for beverage bottlers, or control valves for water
and wastewater facilities, FLS is the go-to brand for many customers. The company has surged about 50% from its 52-week lows last September, in part because its earnings are forecast to nearly double in fiscal 2023 compared with 2022. Additionally, 20% growth is expected in fiscal year 2024, proving that this firm has a bright future.
Dividend yield: 2%
The Manitowoc Co. Inc. (MTW)
Manitowoc is the smallest and most specialized industrial stock on this list, and the only name that does not currently pay a dividend to shareholders after canceling payouts almost a decade ago. It provides engineered lifting solutions, including hydraulic cranes used in construction applications as well as the energy and industrial sectors. At $600 million in market value, it’s not as well-established as other names on this list. However, it is excellent at what it does, and is having one heck of a year from a share price perspective. The stock is up nearly 90% year to date in 2023 thanks to what’s expected to be a 50% surge in earnings in fiscal year 2023. A raised full-year forecast and a strong outlook for the construction industry bode well for this small-cap industrial stock.
Dividend yield: None
Masco Corp. (MAS)
Masco is a mainstay of the plumbing fixtures space, with leading products including faucets, shower heads, tub enclosures and even swimming pool supplies. Its powerful brand portfolio includes nameplates such as Delta, Endless Pools, Master Plumber and Fantasy Spas, among others. The strength of the housing market has provided consistent demand for Masco lately, particularly as higher interest rates mean many homeowners have already refinanced into a lower mortgage rate — and are now fixing up their homes as they make plans to stick around for many years to come.
Dividend yield: 1.9%
Owens Corning (OC)
Building materials giant Owens-Corning is a roughly $13 billion company that provides insulation, roofing and other products. While there has been much talk about a higher interest rate environment weighing on home sales, the real story is that supply remains incredibly constrained and housing prices continued to hit new highs in July. That means construction demand remains robust, and OC stock has roughly doubled off its 52-week lows last year thanks in part to this better-than-expected trend.
Dividend yield: 1.5%
Parker-Hannifin Corp. (PH)
Ohio-based PH manufactures and sells motion and control technologies that are used in industrial, energy, transportation and aerospace markets worldwide. At the beginning of August, the firm announced a 22% increase in its sales year over year to hit a new record. Margins notched a record as well. While growth rates are predicted to abate in the coming fiscal year, PH has proven that it’s a well-run organization that continues to plot a path to consistent growth. And with a market value of more than $50 billion, it’s a dominant force in its specialty areas.
Dividend yield: 1.4%
Watsco Inc. (WSO)
A bit lower profile than some of the other big-name manufacturers on this list, Watsco is an industrial distributor focused on HVAC equipment, refrigeration solutions and plumbing products. As with a few of the other names on this list, a better-than-expected environment for the U.S. economy and the housing industry in particular has been a boon to WSO stock. Shares have risen 48% on the year on continued optimism about tailwinds driving up demand from Watsco’s customers.
Dividend yield: 2.7%
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10 Best Industrial Stocks to Buy in 2023 originally appeared on usnews.com
Update 08/15/23: This story was published at an earlier date and has been updated with new information.
