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Walgreen Company (WAG), Illinois Tool Works Inc. (ITW), A. O. Smith Corporation (AOS): Dividend Achievers for the Long Haul, Part Three

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Walgreen CompanyThis is part 3 (click here to view part 2 ) of a series of articles focusing on companies within the dividend achievers index. This index consists of companies with a streak of at least 10 consecutive years of dividend increases. Most of the constituents of this index are well managed and have sustainable business models, resulting in consistent earnings growth, which is a must in order to pay a significant and growing dividend.

An investor can achieve very attractive returns over the long term by investing in a diverse group of companies that are components of the dividend achievers index.

Dividend achievers for the long haul

In this article, I am highlighting three diverse components of the dividend achievers index that I consider to be among the “best of the best.”

Walgreen Company (NYSE:WAG), operates a network of over 8,500 drugstores located throughout the U.S, consisting of its pharmacy operations and its retail operations, which provide grocery, personal care, household, and beauty products. It also sells products online through drugstore.com, beauty.com, and VisionDirect.com.

Over the last decade, Walgreen Company (NYSE:WAG) has doubled its number of stores. Its current plans are to begin a more moderate level of store growth and to achieve growth in other ways, such as its Take Care Clinic, which offers quality family healthcare at 350 locations across the nation.

A major development in 2012 was a strategic partnership with Alliance Boots. Walgreen Company (NYSE:WAG) acquired a 45% stake in the Swiss-based company, which operates more than 3,000 health and beauty stores in Europe in addition to a growing presence in emerging markets. Alliance Boots also operates a successful pharmaceutical wholesale and distribution division. This partnership should help Walgreen Company (NYSE:WAG) in its efforts to expand globally, particularly if it decides to purchase the remainder of Alliance Boots.

Illinois Tool Works Inc. (NYSE:ITW) is a diversified manufacturing company with global operations that consist of over 800 business units. These business units are divided into eight operating segments, with none of the operating segments contributing more than 14% of total revenue.

Its main form of growth has been through successful acquisitions. It recently acquired Vesta, a Chinese manufacturer of cooking equipment that operates in both developed and emerging markets. Vesta’s products include fryers, griddles, and convection ovens.

Vesta is a great addition to Illinois Tool Works Inc. (NYSE:ITW)’s food-equipment business segment. This segment includes a large number of successful brands such as Hobart, which consists of a wide variety of equipment for the commercial food industry. These items include cooking products, food preparation products, commercial dishwashers, freezers, and pre-pack wrapping systems.

Illinois Tool Works Inc. (NYSE:ITW) has a successful business principal known as the 80/20 business process. This concept has consisted of the company focusing its efforts and innovation on the 20% of customers that provide 80% of revenue. This has been the driving force behind the company’s long-term success.

However, Illinois Tool Works Inc. (NYSE:ITW) has plans to go a step beyond by carefully allocating its future capital expenditures on business segments that are well positioned to deliver significant growth, and to sell the businesses that do not meet its long-term objectives.

A. O. Smith Corporation (NYSE:AOS) is a leading global water technology company that sells a wide variety of residential and commercial water heaters and boilers. In 2011, A. O. Smith Corporation (NYSE:AOS) decided to focus exclusively on its water technology business by selling its electric motor business and making strategic acquisitions to enhance its water technology business.

These acquisitions included Lochinvar, a well-known provider of water heating products, and the North American operations of Takagi’s tank-less water heaters. Tank-less water heaters instantaneously heat water on demand, resulting in energy savings by avoiding the need to constantly heat the volume of water stored in a tank. Takagi’s products have a much smaller footprint than standard water heaters, resulting in much-needed space savings.

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