In this article, we discuss 10 best industrial dividend stocks to buy now.

The industrial sector has been dealing with the twin pressures of labor shortages and supply chain disruptions as macro uncertainties like inflation and rising rates batter the economy. According to a report by research firm Deloitte, there is likely to be a shortfall of 2.1 million skilled jobs by 2030. This environment has kept the optimism around revenue growth in the sector in check even as the economic recovery in the post-pandemic world gathers pace with the lifting of virus restrictions and the resumption of international travel. 

Another important factor influencing growth in the industrial space is the challenges to transportation that are likely to continue beyond 2022. Some of these include driver shortages in trucking and congestion at US container ports. As demand outpaces supply, higher costs are more likely to be passed on to customers, per Deloitte. However, an acceleration in digital technology adoption could bring operational efficiencies to scale in this regard. Sustainability initiatives are also important and factoring into cost of capital. 

Investors who want to look for solid companies with reliable dividend track records to ride the upcoming market storm should invest in some of the best industrial stocks like Union Pacific Corporation (NYSE:UNP), Lockheed Martin Corporation (NYSE:LMT), and 3M Company (NYSE:MMM). Research firm RSM US claims that investments in resilient supply chains and digital tech, in light of geopolitical tensions and rising inflation, will be the two most important trends shaping the future of the industrial world.

Our Methodology

The companies that operate in the industrial sector and have solid dividend profiles were selected for the list. The firms with dividend yields above 1.5% as of October 13 and a more than 10-year track record of payouts were preferred. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Best Industrial Dividend Stocks To Buy Now

10. Fastenal Company (NASDAQ:FAST)

Number of Hedge Fund Holders: 33     

Dividend Yield as of October 13: 2.72%

Fastenal Company (NASDAQ:FAST) engages in the wholesale distribution of industrial and construction supplies. It is one of the best industrial stocks to invest in. Fastenal Company (NASDAQ:FAST)’s near-term revenue growth should benefit from healthy demand in the commodity-related and capital goods markets. With the opening of onsite locations and the installation of FMIs, the long-term growth prospects for the company look solid as well.

On July 15, Argus analyst John Eade kept a Buy rating on Fastenal Company (NASDAQ:FAST) stock and lowered the price target to $55 from $66, noting that the company’s core business trends remained positive.

At the end of the second quarter of 2022, 33 hedge funds in the database of Insider Monkey held stakes worth $893 million in Fastenal Company (NASDAQ:FAST), compared to 29 the preceding quarter worth $1 billion.

Just like Union Pacific Corporation (NYSE:UNP), Lockheed Martin Corporation (NYSE:LMT), and 3M Company (NYSE:MMM), Fastenal Company (NASDAQ:FAST) is one of the best industrial stocks to buy now according to hedge funds. 

In its Q2 2021 investor letter, Nomadic Value Partners, an asset management firm, highlighted a few stocks and Fastenal Company (NASDAQ:FAST) was one of them. Here is what the fund said:

“In mid-June we completely sold out of Fastenal Company (NASDAQ:FAST). Although we had been using FAST as a source of liquidity for a few months already, it still feels bad to say an official goodbye to such an amazing company. However, we must stay focused on the math and the math concludes a difficult task to get our return hurdle going forward. The last time FAST traded at a forward P/E ratio of 34x (the multiple at our exit), the year was 2012. The company had been growing at 20% per year, and the US was about to embark on a shale oil boom, sustaining a low-teens growth trajectory. Today, FAST’s sales growth could turn anemic as the surge for COVID safety products is waning and heavy construction and resources customers are slow to return. An investor must have an optimistic view towards 5+ years of strong real GDP growth as well as sustained inflation. If one lowers the growth assumption to a more likely outcome, then the implicit bet is that low to negative real interest rates will persist and the forward P/E multiple will stay elevated4. I do not want to make such a strong macro bet as the justification for owning a stock. Fastenal is a cyclical business with a growth model proven to take market share secularly, but the time to buy FAST (the stock) will be when we are in the depths of an industrial recession. Stay tuned.”

9. Air Products and Chemicals, Inc. (NYSE:APD)

Number of Hedge Fund Holders: 33 

Dividend Yield as of October 13: 2.83%

Air Products and Chemicals, Inc. (NYSE:APD) provides atmospheric gases, process and specialty gases, equipment, and services worldwide. It is one of the top industrial stocks to invest in. Air Products and Chemicals, Inc. (NYSE:APD) announced on October 6 that it was working to produce green liquid hydrogen. As part of the plan, the firm will spend $500 million to build, own, and operate a 35 metric tons/day facility at a greenfield site in Massena, New York, for the production of green liquid hydrogen along with the liquid hydrogen distribution and dispensing operations. 

On October 4, investment advisory Citi kept a Neutral rating on Air Products and Chemicals, Inc. (NYSE:APD) stock and lowered price target to $251 from $272. Analyst PJ Juvekar issued the ratings update. 

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Air Products and Chemicals, Inc. (NYSE:APD), with 498,408 shares worth more than $119.9 million. 

In its Q2 2022 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Air Products and Chemicals, Inc. (NYSE:APD) was one of them. Here is what the fund said:

“This quarter we are highlighting Air Products and Chemicals, Inc. (NYSE:APD) as a relative yield example in the Materials sector. APD is a leading global industrial gas supply company and is the largest supplier of hydrogen and helium in the world. It has a sustainable competitive advantage due to long-term customer relationships and contracts, high customer switching costs, and the mission critical nature of its products. Industrial gases are a relatively small fraction of customers’ overall costs but are crucial to ensure uninterrupted production.

Our thesis on APD is that it appears well-positioned for consistent double-digit growth due to a large multi-year capital allocation plan, and the need for accelerating capital expenditures by its customers. It has a $25 billion backlog driven by traditional gas investments along with new growth opportunities like gasification, green hydrogen, and carbon capture. APD’s gasification technologies help improve energy efficiency and independence, which is a key focus for its customers. The company also has a strong management team with a record of expanding margins and exemplary capital allocation.”

8. Republic Services, Inc. (NYSE:RSG)

Number of Hedge Fund Holders: 33    

Dividend Yield as of October 13: 1.54% 

Republic Services, Inc (NYSE:RSG) offers environmental services in the United States. It is one of the premier industrial stocks to invest in. Republic Services, Inc. (NYSE:RSG) is a high-quality income growth idea with an incredibly stable cash-flow profile due to the essential nature of its offerings. On July 19, Republic Services, Inc. (NYSE:RSG) released its 2021 Sustainability Report, which highlighted the company’s efforts supporting decarbonization and circularity, and outlined continued progress towards its ambitious 2030 sustainability goals.

On August 9, Deutsche Bank analyst Kyle White kept a Buy rating on Republic Services, Inc. (NYSE:RSG) stock and raised the price target to $158 from $147, highlighting that the company beat Q2 expectations and raised its full year outlook as assumed in the recent earnings report.

Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Chilton Investment Company is a leading shareholder in Republic Services, Inc (NYSE:RSG), with 1.4 million shares worth more than $182 million. 

7. Illinois Tool Works Inc. (NYSE:ITW)

Number of Hedge Fund Holders: 34    

Dividend Yield as of October 13: 2.83%

Illinois Tool Works Inc. (NYSE:ITW) manufactures and sells industrial products and equipment worldwide. It is one of the major industrial stocks to invest in. The firm has an impressive dividend history. It has consistently paid a dividend to shareholders for close to five decades. These payouts have registered consistent growth in the past twenty-six years. On September 28, the company declared a quarterly dividend of $1.31 per share, an increase of 7.4% from the previous dividend of $1.22 per share. 

On August 24, Bank of America analyst Andrew Obin reinstated coverage of Illinois Tool Works Inc. (NYSE:ITW) with a Neutral rating and a $220 price target, stressing that the rating balances an improving long-term story with near-term macro headwinds. 

At the end of the second quarter of 2022, 34 hedge funds in the database of Insider Monkey held stakes worth $366 million in Illinois Tool Works Inc. (NYSE:ITW), compared to 36 in the previous quarter worth $426 million.

6. General Dynamics Corporation (NYSE:GD)

Number of Hedge Fund Holders: 42  

Dividend Yield as of October 13: 2.26%

General Dynamics Corporation (NYSE:GD) operates as an aerospace and defense company worldwide. It is one of the elite industrial stocks to invest in. On September 19, the company announced that it had been awarded a maximum $414 million modification to a five-year base contract with one four-year option period. The contract pertains to multiple items used in the Abrams Main Battle Tank, Stryker Family of Vehicles, Light Armored Vehicle Family of Vehicles, Cougar, Buffalo, and RG-31.

On September 28, Wells Fargo analyst Matthew Akers maintained an Overweight rating on General Dynamics Corporation (NYSE:GD) stock and lowered the price target to $249 from $256, noting that high geopolitical tensions were a positive catalyst for the shares. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Longview Asset Management is a leading shareholder in General Dynamics Corporation (NYSE:GD), with 30 million shares worth more than $6.6 billion. 

Along with Union Pacific Corporation (NYSE:UNP), Lockheed Martin Corporation (NYSE:LMT), and 3M Company (NYSE:MMM), General Dynamics Corporation (NYSE:GD) is one of the best industrial stocks to buy now according to hedge funds. 

In its Q2 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and General Dynamics Corporation (NYSE:GD) was one of them. Here is what the fund said:

“Finally, General Dynamics Corporation (NYSE:GD)’s defense business enabled the stock to resist the bear market’s downward pressure. We eliminated the position to fund more attractive holdings.” 

5. Honeywell International Inc. (NASDAQ:HON)

Number of Hedge Fund Holders: 42    

Dividend Yield as of October 13: 2.38%

Honeywell International Inc. (NASDAQ:HON) operates as a diversified technology and manufacturing company worldwide. It is one of the best industrial stocks to invest in. The firm has an impressive dividend history. It has consistently paid a dividend to shareholders for close to two decades. These payouts have registered consecutive growth in the past eleven years. On September 30, the company declared a quarterly dividend of $1.03 per share, an increase of 5.1% from the previous dividend of $0.98 per share. 

On July 29, JPMorgan analyst Stephen Tusa maintained an Overweight rating on Honeywell International Inc. (NASDAQ:HON) stock and raised the price target to $190 from $180, noting that the company posted a solid Q2 beat.

At the end of the second quarter of 2022, 42 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Honeywell International Inc. (NASDAQ:HON), compared to 50 in the previous quarter worth $1.76 billion.

In its Q3 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Honeywell International Inc. (NASDAQ:HON) was one of them. Here is what the fund said:

“The largest exited positions were Oracle, which outperformed significantly, and Texas Instruments and Honeywell International Inc. (NASDAQ:HON), which were roughly flat versus the market in the quarter but were edged out for inclusion by other stocks that became even more attractively valued.”

4. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 45    

Dividend Yield as of October 13: 2.67%

Caterpillar Inc. (NYSE:CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. It is one of the top industrial stocks to invest in. On September 30, Tigress Financial analyst Ivan Feinseth maintained a Buy rating on Caterpillar Inc. (NYSE:CAT) stock and lowered the price target to $266 from $282, noting that the company’s yearly target still represents a potential total return with dividends of over 60% from current levels.

At the end of the second quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $3.2 billion in Caterpillar Inc. (NYSE:CAT), compared to 54 in the previous quarter worth $4 billion.

In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Caterpillar Inc. (NYSE:CAT) was one of them. Here is what the fund said:

“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”

3. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 54 

Dividend Yield as of October 13: 5.47%

3M Company (NYSE:MMM) operates as a diversified technology company worldwide. It is one of the premier industrial stocks to invest in. On August 31, the company announced that it would be eliminating jobs as part of the broader cost cutting drive. The scope of the cutting was not revealed but a senior executive at the firm said that the business cannot avoid this tough necessity. 

On September 9, UBS analyst Chris Snyder upgraded 3M Company (NYSE:MMM) stock to Neutral from Sell with a price target of $126, up from $118, highlighting that valuation on the stock now fully accounts for the company’s litigation liability and broader overhang. 

In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and 3M Company (NYSE:MMM) was one of them. Here is what the fund said:

“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.”

2. Lockheed Martin Corporation (NYSE:LMT)

Number of Hedge Fund Holders: 55  

Dividend Yield as of October 13: 3.02%  

Lockheed Martin Corporation (NYSE:LMT) is a security and aerospace company that engages in the research, design, development, manufacture, integration, and sustainment of defense technology systems worldwide. It is one of the major industrial stocks to invest in. Lockheed Martin Corporation (NYSE:LMT) recently announced that it had been awarded an estimated combined ceiling of $5.1 billion for fixed-price modifications. These modifications exercise options for the production and delivery of sonobuoy capability categories including active/passive combo, multi-static receiver, and testing expenditures. 

On October 6, Jefferies analyst Sheila Kahyaoglu kept a Hold rating on Lockheed Martin Corporation (NYSE:LMT) stock and lowered the price target to $450 from $470. 

At the end of the second quarter of 2022, 55 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Centene Corporation (NYSE: CNC), compared to 56 in the previous quarter worth $2.4 billion.

1. Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 65    

Dividend Yield as of October 13: 2.71%

Union Pacific Corporation (NYSE:UNP) operates in the railroad business in the United States. It is one of the elite industrial stocks to invest in. On September 30, Barclays analyst Brandon Oglenski kept an Overweight rating on the Union Pacific Corporation (NYSE:UNP) stock and lowered the price target to $235 from $255, highlighting the robust earnings of the firm in the ratings update. 

At the end of the second quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $6.4 billion in Union Pacific Corporation (NYSE:UNP), compared to 89 the preceding quarter worth $7 billion.

In its Q2 2022 investor letter, Diamond Hill Capital Management, an asset management firm, highlighted a few stocks and Union Pacific Corporation (NYSE:UNP) was one of them. Here is what the fund said:

“Union Pacific Corporation (NYSE:UNP) is a large railroad company that carries freight across the western US and between Canada and Mexico. It transports a variety of industrial goods, raw materials and containerized freight between major US ports, industrial hubs and international gateways. The goods that Union Pacific and other railroads transport are fundamental inputs in the economy and are resilient to long-term trends in the business cycle. We believe Union Pacific offers a compelling investment opportunity as its substantial infrastructure investments, relative cost advantages, limited leverage and the essential nature of the products it delivers provides the company with what we believe is one of the widest moats in the transportation sector. We also like that Union Pacific has a shareholder-oriented management team that is focused on growing earnings while returning capital to shareholders.”

You can also take a peek at 10 Best Stocks to Buy According to Angela Aldrich’s Bayberry Capital Partners and Top 10 Tech Stocks to Buy According to Billionaire Louis Bacon.

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Disclosure. None. 10 Best Industrial Dividend Stocks To Buy Now is originally published on Insider Monkey.