Consider These Highly Profitable, Dividend-Paying Industrials: 3M Co. (MMM), Illinois Tool Works Inc. (ITW)

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Companies within the industrial sector don’t have exciting businesses. They aren’t likely to be featured in the financial media as the next hot sector or major growth story. At the same time, they provide necessary functions to our society. They manufacture and distribute real, tangible things that build our very infrastructure and contribute heavily to the economy. None of these companies are likely to be the market’s sexiest new ideas, but at the same time they have important similarities among them: long histories of financial success, a demonstrable track record of growth, and generous dividends. If your portfolio needs a dose of reality, take some time to get to know these diversified industrials.

Earnings Analysis: 3M Co. (NYSE:MMM)

Minnesota Mining and Manufacturing, oh my

No discussion of industrial stocks with long histories of financial dominance is complete without 3M Co. (NYSE:MMM), formerly known as Minnesota Mining and Manufacturing. This Dow Jones Industrial Average component is the gold standard for industrial firms. In February, 3M announced it will increase its dividend by 8%. Not only that, but the company also announced it had authorized a $7.5 billion stock buyback program. The dividend raise marked the 55th consecutive year of dividend increases. Furthermore, 3M has paid uninterrupted dividends to shareholders for an amazing 96 years in a row. Over the past ten years, the company has returned $32 billion to shareholders through a combination of dividends and share repurchases, or 89% of reported net income.

You can’t maintain a track record like that without the financial performance to back it up. 3M Co. (NYSE:MMM)’s sales were roughly flat in 2012 versus the prior year, but are up almost 30% since 2009. Despite sluggish sales last year as a result of the continued slow economic recovery, the company effectively kept expenses in check and opportunistically bought back shares. As a result, the company’s bottom line continued its upward trajectory: diluted earnings per share increased 6% year over year.

An equally impressive streak

Diversified global industrial manufacturer Dover (NYSE:DOV) has an impressive track record itself. Last year, the company raised its dividend 11%, representing the 57th consecutive year of a dividend increase. That record is the fourth-longest streak of dividend increases of any publicly listed company according to Mergent.

Dover’s fiscal 2012 results were impressive. Revenue increased 6% and 10% during the fourth-quarter and fiscal 2012, respectively. In addition, adjusted earnings per share for the full year increased 15% to $4.44 versus 2011.

Going forward, shareholders should fully expect the company’s dividend streak to continue. Along with the 2012 earnings announcement, Dover reaffirmed its 2013 projections. Full-year revenue growth is expected to be 7% to 9% and diluted earnings per share from continuing operations are expected to fall within a range of $5.05 to $5.35. As a result, Dover isn’t excessively priced at its current valuation. Shares trade hands for about 16 times its 2012 adjusted earnings per share and 14 times the midpoint of its expected 2013 earnings from continuing operations.

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