The diversified machinery world is one where a lot of a company’s clients are either large non-cyclical or less cyclical businesses or government entities, and I like how that adds stability to the industry as a whole. And as we all know, I’m a hardcore dividend junkie who hates few things worse than having those dividends pulled out from under me. So let’s see if a few of the top payers in the industry are likely to keep up the good work.
However, I don’t like that General Electric Company (NYSE:GE) draws a lot of drama to itself. For example, the company designed the Fukushima power plant’s reactors that were criticized as far back as the ’70s and failed horribly after the tsunami. General Electric Company (NYSE:GE) has also significantly reduced its US workforce, dodges taxes with the best of them and is highly ranked as both an air and water polluter. These are not good PR moves, so I tend to be hesitant about GE. This is especially the case with a mediocre-at-best earnings multiple of 18. I’ll pass for now — the dividend is the first thing to go when PR reaches a low.
Hillenbrand, Inc. (NYSE:HI) has a good start with its commitment to its dividend. I also like how its main business applications include processing, which is pretty vague, and funeral products. Morbid as it is, people won’t stop dying. And in a world where everything is processed half a dozen times before you even hear about it, processing equipment also sounds pretty safe. Of course, the 3.1% dividend also isn’t too bad.
One issue I tend to have with production companies is that I like a smaller price to book ratio. When it gets too high, I start to worry about whether the business isn’t moving enough of its inventory to stay relevant. With Hillenbrand, Inc. (NYSE:HI)’s book multiple of 3, my concerns are there. I’m also not exactly in love with the nearly 18 earnings multiple — like with GE, kinda mediocre. I want a good deal here. Hillenbrand, Inc. (NYSE:HI) is an okay company, but I’ll wait until it gets cheaper before I give it a more serious look.
Koninklijke Philips Electronics NV (ADR) (NYSE:PHG)
Philips (which I will be calling Philips for remainder of this article so I don’t accidentally butcher the name) starts off on the right foot by being a Dutch company. I love companies that are headquartered in other countries because I’m under-diversified in American holdings. I like how Philips is the biggest manufacturer of lighting in the world, and I also like how the company is streamlining by getting rid of most of its consumer electronics business. Consumers are very finicky and notoriously unreliable… unless you’re Apple Inc. (NASDAQ:AAPL), but that’s a rant for another day. Koninklijke Philips Electronics NV (ADR) seems to have a pretty good handle on continuing its 2.8% dividend, notwithstanding that the company’s environmental record is top notch.
But yeah, there is a catch. Koninklijke Philips Electronics NV (ADR) is barely turning a profit, pulling a .9% margin that rather sickens me. On top of that, the company’s trading at an earnings multiple of 93. That’s just sick. If Philips were trading in a reasonable range, I’d snatch it up fast enough to make your head spin. But as it is, I’m giving the company a pretty wide berth.
There’s a lot to like about electronics companies and their dividends. But the search goes on for reliable, ethical dividends that are trading at a reasonable price.
The article Are These Machinery Dividends Going to Break Down? originally appeared on Fool.com and is written by Chris Hodge.
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