The diversified machinery world is one where a lot of a company’s clients are either large non-cyclical or less cyclical businesses or government entities, and I like how that adds stability to the industry as a whole. And as we all know, I’m a hardcore dividend junkie who hates few things worse than having those dividends pulled out from under me. So let’s see if a few of the top payers in the industry are likely to keep up the good work.
General Electric Company (NYSE:GE) is one of the good old companies that you never expect to have a problem. But then it came dangerously close to financial catastrophe in the panic of 2008. When a $242 billion company needs a loan, something’s wrong. I like the 3.3% dividend and 9.3% profit margin on the company’s $146 billion in trailing sales.
However, I don’t like that General Electric Company (NYSE:GE) draws a lot of drama to itself. For example, the company designed the Fukushima power plant’s reactors that were criticized as far back as the ’70s and failed horribly after the tsunami. General Electric Company (NYSE:GE) has also significantly reduced its US workforce, dodges taxes with the best of them and is highly ranked as both an air and water polluter. These are not good PR moves, so I tend to be hesitant about GE. This is especially the case with a mediocre-at-best earnings multiple of 18. I’ll pass for now — the dividend is the first thing to go when PR reaches a low.
Hillenbrand, Inc. (NYSE:HI) has a good start with its commitment to its dividend. I also like how its main business applications include processing, which is pretty vague, and funeral products. Morbid as it is, people won’t stop dying. And in a world where everything is processed half a dozen times before you even hear about it, processing equipment also sounds pretty safe. Of course, the 3.1% dividend also isn’t too bad.
One issue I tend to have with production companies is that I like a smaller price to book ratio. When it gets too high, I start to worry about whether the business isn’t moving enough of its inventory to stay relevant. With Hillenbrand, Inc. (NYSE:HI)’s book multiple of 3, my concerns are there. I’m also not exactly in love with the nearly 18 earnings multiple — like with GE, kinda mediocre. I want a good deal here. Hillenbrand, Inc. (NYSE:HI) is an okay company, but I’ll wait until it gets cheaper before I give it a more serious look.