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.
An oil worker wearing a hard hat and a safety vest checking an industrial oil pump.
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.