In this article, we will take a look at some of the best industrial stocks that pay dividends.

In recent years, the industrial sector has generally seen stronger demand, although some segments, such as manufacturing automation, have started to show signs of slowing. According to a report from Edward Jones, the overall recovery is likely to continue, but several short-term risks could affect the sector’s growth. These include a possible slowdown in economic activity, ongoing geopolitical tensions, and weakening business and consumer confidence.

Since many industrial companies are cyclical, their performance tends to rise and fall with the changing conditions in the industries they serve. Within the industrial space, companies may be at different points in their business cycles. Because of this, investors may benefit from greater diversification by holding stocks from various industrial subsectors and targeting firms that serve a range of end markets.

Over the past three years, the S&P Industrial Index has outpaced the broader market, supported by strong performance in areas such as Aerospace & Defense, Building Products, Machinery, and Electrical Equipment. The trend continues this year as well, as the industrial index has surged by over 14% since the start of 2025, compared with a 6.67% return of the broader market. Given this, we will take a look at some of the best industrial stocks that pay dividends.

Our Methodology

For this article, we first scanned Insider Monkey’s database of 1,000 hedge funds, as of the first quarter of 2025, and selected industrial companies across various segments within the industry, including manufacturing, construction, aerospace and defense, machinery and equipment, transportation and logistics, as well as utilities. From this pool of companies, we identified 13 dividend companies and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q1 2025.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

13. Nordson Corporation (NASDAQ:NDSN)

Number of Hedge Fund Holders: 23

Nordson Corporation (NASDAQ:NDSN) is one of the best industrial stocks that pay dividends. On June 5, the company declared a quarterly dividend of $0.78 per share, which was in line with its previous dividend. Overall, it has raised its payouts for 61 consecutive years. The stock supports a dividend yield of 1.41%, as of July 13.

In addition to its dividends, Nordson Corporation (NASDAQ:NDSN) has also shown solid earnings in fiscal Q2 2025. The company reported revenue of $683 million, which showed a 5% growth from the same period last year. Sales benefited from an 8% boost due to a recent acquisition, though this was partly offset by a 2% decline in organic sales and a slight negative impact from currency translation of less than 1%. EBITDA for the second quarter reached $217 million, representing 32% of sales, up 7% from the $203 million, or 31% of sales, reported in the same period last year. Looking ahead, the company expects third-quarter fiscal 2025 sales to fall between $710 million and $750 million, with adjusted earnings projected at $2.55 to $2.75 per diluted share.

Nordson Corporation (NASDAQ:NDSN) develops advanced precision technologies aimed at addressing challenges across a wide range of industries. The company specializes in equipment manufacturing and is recognized for its top-tier precision engineering. Its offerings include fully integrated systems, consumables, and aftermarket parts.

12. A. O. Smith Corporation (NYSE:AOS)

Number of Hedge Fund Holders: 37

A. O. Smith Corporation (NYSE:AOS) is among the best industrial stocks that pay dividends. The company runs a capital-efficient, high-return business centered around the established and stable North American water heater market, where about 80–85% of demand comes from replacements. In this core market, it holds strong pricing power due to limited competition and gains added strength from a hybrid distribution model that provides both consistency and broad market access.

On July 8, A. O. Smith Corporation (NYSE:AOS) declared a quarterly dividend of $0.34 per share, which was consistent with its previous dividend. The company’s dividend policy has remained stable over the years, as it has raised its payouts for 32 consecutive years. In addition, it has paid uninterrupted dividends to shareholders for 85 years in a row. As of July 13, the stock has a dividend yield of 1.97%.

A. O. Smith Corporation (NYSE:AOS)’s cash position was solid, which helped the company distribute dividends smoothly over the years. In the most recent quarter, the company reported an operating cash flow of $38.7 million, and its free cash flow came in at $17.4 million.

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

Number of Hedge Fund Holders: 46

Illinois Tool Works Inc. (NYSE:ITW) is one of the best dividend stocks in the industrial sector. The company stands out as a strong example of setting bold objectives, meeting them, and delivering long-term value to its shareholders. Between 2012 and 2023, ITW implemented its Enterprise Strategy, which led to a rise of over 9 percentage points in operating margin, more than tripled both its earnings per share and market capitalization, and grew its dividend by 3.7 times.

Illinois Tool Works Inc. (NYSE:ITW) currently offers a quarterly dividend of $1.50 per share, with a dividend yield of 2.31%, as of July 13. The company has been rewarding its shareholders with growing dividends for the past 52 years.

Illinois Tool Works Inc. (NYSE:ITW) aims to reach a 30% operating margin by 2030 and deliver average annual earnings per share growth of 9% to 10%, which would allow for a 7% yearly increase in its dividend. The company also plans to turn all of its net income into free cash flow, helping to fund rising dividends, share repurchases, and ongoing investments in the business. While the strategy is ambitious, ITW’s consistent improvement in operating margin over time shows that it’s achievable.

10. General Dynamics Corporation (NYSE:GD)

Number of Hedge Fund Holders: 46

General Dynamics Corporation (NYSE:GD) is among the best industrial stocks that pay dividends. On June 4, the company declared a quarterly dividend of $1.50 per share, having raised it by 5.6% in March. This marked the company’s 28th consecutive year of dividend growth. The stock’s dividend yield comes in at 1.99%, as of July 13.

General Dynamics Corporation (NYSE:GD) is one of the two main builders of military ships and is a key supplier of tanks and land vehicles for the US Army. In addition to its strong presence in defense manufacturing, the company also operates one of the largest IT and services businesses focused on defense, which helps provide steady revenue even when the Pentagon reduces spending on hardware.

General Dynamics Corporation (NYSE:GD) reported strong earnings in the first quarter of 2025, with revenues coming in at $12.22 billion. The revenue not only grew by 14% on a YoY basis, but also beat analysts’ estimates by $279.2 million. The company’s operating cash flow for the quarter came in at $148 million. In addition, it returned $383 million to shareholders through dividends.

9. Dover Corporation (NYSE:DOV)

Number of Hedge Fund Holders: 53

Dover Corporation (NYSE:DOV) is among the best industrial stocks that pay dividends. The company holds one of the longest dividend streaks in the industry, spanning 68 years, which makes it a reliable investment option for income investors. Currently, it pays a quarterly dividend of $0.515 per share and has a dividend yield of 1.09%, as of July 13.

Dover Corporation (NYSE:DOV) produces equipment and components, including consumables, aftermarket parts, and digital solutions. The company is known for consistently generating strong free cash flow.

In the first quarter of 2025, Dover Corporation (NYSE:DOV) reported an operating cash flow of $157.4 million, up from $146.6 million in the same period last year. The operating cash flow represented 8.4% of the revenue. The company’s free cash flow also grew to $109.3 million, from $106.4 million in the prior-year period. It delivered a strong first-quarter performance, with a positive book-to-bill ratio in all five segments and building momentum throughout the quarter, reinforcing confidence in its short-term outlook.

8. United Parcel Service, Inc. (NYSE:UPS)

Number of Hedge Fund Holders: 57

United Parcel Service, Inc. (NYSE:UPS) is one of the best industrial stocks that pay dividends. Stronger operations, a better customer base, and the settlement of labor-related challenges all work in its favor for those taking a long-term view.

United Parcel Service, Inc. (NYSE:UPS) currently offers a quarterly dividend of $1.64 per share for a dividend yield of 6.48%, as of July 13. The company has been rewarding shareholders with growing dividends for the past 23 years. That said, the investment is not low risk because of its unusually high dividend yield, which is tied to a payout ratio that’s around 90%. However, it’s worth noting that companies can maintain payout ratios above 100% temporarily, since dividends are typically paid from cash flow rather than reported earnings.

United Parcel Service, Inc. (NYSE:UPS) has a stable cash generation. In the first quarter of 2025, the company reported an operating cash flow of $2.3 billion, and its free cash flow was $1.48 billion. UPS ranks among the world’s largest companies and offers a wide array of integrated logistics services to customers across over 200 countries and territories.

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

Number of Hedge Fund Holders: 60

Air Products and Chemicals, Inc. (NYSE:APD) is a worldwide leader in providing industrial gases and equipment for liquefied natural gas (LNG) processing. It’s also one of the top global suppliers of merchant hydrogen and plays a key role in hydrogen fuel infrastructure. The company operates over 100 hydrogen plants with the ability to produce 7 million kilograms of hydrogen fuel daily.

In the first quarter of 2025, Air Products and Chemicals, Inc. (NYSE:APD) reported a strong cash position with an operating cash flow of $811.7 million, up $626.6 million from the same period last year. At the end of December 2024, the company had almost $2 billion available in cash and cash items. APD has always remained committed to its shareholder return as the company expects to pay approximately $1.6 billion to investors through dividends in FY25.

Air Products and Chemicals, Inc. (NYSE:APD) is among the best dividend stocks in the industrial sector as the company has raised its payouts for 43 years in a row. The company currently pays a quarterly dividend of $1.79 per share and has a dividend yield of 2.45%, as of July 13.

6. FedEx Corporation (NYSE:FDX)

Number of Hedge Fund Holders: 62

FedEx Corporation (NYSE:FDX) is among the best dividend stocks in the industrial sector. The American multinational holding company specializes in transportation, e-commerce, and business services. The company is taking steps to improve its current operations while positioning itself to benefit from future growth areas, especially in e-commerce.

On June 9, FedEx Corporation (NYSE:FDX) declared a 9.1% increase in its quarterly dividend to $1.45 per share. Through this increase, the company stretched its dividend growth streak to five years. As of July 13, the stock has a dividend yield of 2.46%. FDX is a reliable option for income investors, as its payout ratio is approximately 33%, which is not only manageable but also provides the company with ample room to continue increasing its dividend.

FedEx Corporation (NYSE:FDX) is a reliable logistics company poised to gain from the ongoing expansion of e-commerce and global trade. While it might require some patience, it’s not a stock to count out, thanks to its well-established brand, extensive network, and solid positioning to capitalize on economic growth.

5. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 62

Caterpillar Inc. (NYSE:CAT) is one of the best dividend stocks in the industrial sector. The company’s broad international presence puts it in a strong position to gain from increasing global infrastructure spending. As worldwide demand for infrastructure equipment increases and geopolitical shifts potentially provide further support, Caterpillar stands out as an attractive option for investors looking for both income and growth. Its strong operations, steady dividend growth, and well-positioned global presence make it a leading choice for those seeking a stable yet promising industrial investment.

Caterpillar Inc. (NYSE:CAT) declared a 7% hike in its quarterly dividend to $1.51 per share on June 11. This marked the company’s 31st consecutive year of dividend growth. The stock supports a dividend yield of 1.49%, as of July 13.

Caterpillar Inc. (NYSE:CAT)’s cash remained stable over the years. In the first quarter of 2025, the company generated $1.3 billion in enterprise operating cash flow and finished the quarter with $3.6 billion in cash on hand. During the same period, the company used $3.7 billion to buy back its common stock and allocated $0.7 billion for dividend payments.

4. Lockheed Martin Corporation (NYSE:LMT)

Number of Hedge Fund Holders: 68

Lockheed Martin Corporation (NYSE:LMT) is one of the best dividend stocks in the industrial sector. In the most recent quarter, the company has reiterated its full-year guidance, expecting modest revenue growth in the low single digits along with a rise in diluted EPS. While the forecast isn’t particularly strong, it should still generate enough free cash flow to support ongoing share repurchases and steady dividend growth.

Lockheed Martin Corporation (NYSE:LMT)’s sizable backlog— more than twice its annual sales— gives it clear visibility into future demand. This helps the company manage spending effectively and maintain solid control over its free cash flow, which is crucial for planning shareholder returns.

On June 26, Lockheed Martin Corporation (NYSE:LMT) declared a quarterly dividend of $3.30 per share, which was in line with its previous dividend. Overall, the company has raised its dividends for 22 consecutive years. The stock has a dividend yield of 2.82%, as of July 13.

3. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 69

3M Company (NYSE:MMM) is among the best dividend stocks in the industrial sector. The company encountered some difficulties last year, but following the spinoff of its healthcare division, it appears to be on the path to recovery. It reported solid earnings for the first quarter of 2025 and is steadily progressing on key operational objectives aligned with CEO Bill Brown’s turnaround plan.

3M Company (NYSE:MMM) posted revenue of $5.8 billion, which, though, fell by 28% on a YoY basis, beat analysts’ estimates by $50.7 million. The revenue showed an organic growth of 1.5% from the same period last year. In its earnings report, the company highlighted that it remains committed to strengthening its business fundamentals in the current dynamic environment, fostering a new performance-driven culture, and advancing its strategic priorities, all while making the most of its broad global network and strong presence in the US.

3M Company (NYSE:MMM) currently offers a quarterly dividend of $0.73 per share. The company has raised its payout just once after slashing it by 50% last year. However, it has remained committed to its shareholder return, paying $1.7 billion to investors through dividends and share repurchases in the most recent quarter. The stock has a dividend yield of 1.87%, as of July 13.

2. Honeywell International Inc. (NASDAQ:HON)

Number of Hedge Fund Holders: 75

Honeywell International Inc. (NASDAQ:HON) is one of the best industrial dividend stocks. The company has been grabbing investors’ attention due to its solid balance sheet. It has raised its dividend 15 times over the past 14 consecutive years. As noted in its 2025 proxy statement, it has strategically allocated $14.6 billion across mergers and acquisitions, capital investments, share repurchases, and dividend payouts to strengthen its portfolio and boost shareholder returns.

Honeywell International Inc. (NASDAQ:HON)’s strong cash flow also supports its ability to maintain dividend payments. In the first quarter of 2025, the company reported $600 million in operating cash flow and $300 million in free cash flow, marking a 61% increase from the prior year. A free cash flow margin of 13% further underscores its positive financial outlook.

For the full year 2025, Honeywell International Inc. (NASDAQ:HON) expects operating cash flow to be between $6.7 billion and $7.1 billion, with free cash flow projected in the range of $5.4 billion to $5.8 billion. The company pays a quarterly dividend of $1.13 per share and has a dividend yield of 1.92%, as of July 13.

1. Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 85

Union Pacific Corporation (NYSE:UNP) is among the best dividend stocks in the industrial sector. The company has paid regular dividends to shareholders for 125 years in a row and has raised its payouts for 18 consecutive years. It currently pays a quarterly dividend of $1.34 per share for a dividend yield of 2.28%, as of July 13.

Union Pacific Corporation (NYSE:UNP), the railroad holding company, generates its freight revenue from three core segments— bulk, industrial, and premium— with each accounting for roughly one-third of the total. Its broad product offering and efficient cost structure help the company remain stable, even during periods of increased tariffs. Union Pacific consistently shows strong operational performance and a solid return on invested capital, with a high operating margin that highlights its ability to maintain profitability after expenses.

Looking ahead to 2025, Union Pacific Corporation (NYSE:UNP) plans to invest $3.4 billion to improve safety, upgrade infrastructure, and support customer growth. This equates to more than $9 million per day dedicated to enhancing its rail network and contributing to economic and supply chain development across the 23 states it serves, positively impacting local, regional, and national economies.

While we acknowledge the potential of UNP to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than UNP and that has 100x upside potential, check out our report about this cheapest AI stock.

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