General Electric Company (GE), Illinois Tool Works Inc. (ITW): Good Dividends in Diversified Machinery

Machinery companies are some of the cornerstones of our economy. They produce what we use every day, help our police and military to keep us safe and provide potentially awesome returns to us shareholders. But in my opinion, the best returns are solid dividends that I can reinvest over the long term.

Storied history

General Electric Company (NYSE:GE) is a massive company with a storied history and a high ranking for gross revenue and profits. With a $230 billion market cap and 9.6% margins on $146 billion in revenue, GE looks pretty solid overall. And the current dividend payment of $0.19/share as of February is near the low end of General Electric Company (NYSE:GE)’s past 15 years of dividends. Since the dividends have been consistent for over a century, that’s a great sign.

Of course, not everything is coming up roses with General Electric Company (NYSE:GE). The company dropped its dividend considerably during the panic of 2008, and has only modestly risen it despite laying off a considerable portion of its American workforce and not paying any taxes on its considerable profits during 2010.

Since the record shows General Electric Company (NYSE:GE)’s top executives received 27% average pay raises during the same period in which the company wasn’t paying taxes and cut its dividend down to 2002 levels, it seems General Electric Company (NYSE:GE) would rather benefit its top employees than its investors, meaning the company isn’t the best idea for satisfying your dividend needs.

Emissions threat

Illinois Tool Works Inc. (NYSE:ITW) is a patent-rich Fortune 200 company that has a booming business in 58 countries. Also, Illinois Tool Works Inc. (NYSE:ITW) has paid 25 dividends over the past 20 quarters and shown steady growth. A growing dividend that is covered by profits tends to be a sign of security and a commitment to rewarding shareholders. In addition, Illinois Tool Works Inc. (NYSE:ITW) has shown a solid environmental commitment by having volunteers from within its ranks develop methods it has used to cut down emissions considerably.

However, the emissions level still ranks Illinois Tool Works Inc. (NYSE:ITW) within the top 100 airborne polluters in the US. As well, the company has been cited as recently as the year 2000 for illegally exporting chemicals without proper licensing and even falsifying shipping documents.

While the fines from these operations are no longer weighing on the balance sheet, a company that is willing to break laws in the course of its operation may not have investor interests at heart. You might consider when pondering Illinois Tool Works Inc. (NYSE:ITW)’ 2.4% dividend how much it will have to be cut to fund legal defenses if the Feds catch the company perpetrating any more shady activities.