Why These Industrials Companies Will Manufacture Great Long-Term Returns

Boring, for lack of a better word, is good. Sometimes, it pays to ignore the talking heads in the financial media and the obsessive hype lavished on speculative stocks that may or may not exist in a few years' time.

When you're investing your hard-earned money in stocks, it's important to use history as a guide. Equities always involve risk of loss, which is why it's worthwhile to examine which businesses have demonstrated true staying power.

Dividends that have stood the test of time
For investors with a long time horizon, it's not about chasing the high-flying stocks currently garnering media attention. It's about building long-term wealth. Diversified industrials such as Emerson Electric (NYSE: EMR  ) , 3M Company (NYSE: MMM  ) , Dover (NYSE: DOV  ) , and Stanley Black & Decker (NYSE: SWK  ) aren't likely to be featured on CNBC as the sexy new investing idea. What they can offer you, however, are years of reliable returns, and strong dividend payments that have richly rewarded investors for decades.

Emerson Electric last raised its dividend in the fall of 2012. Emerson has a fantastic track record of raising its dividend for 55 consecutive years. Last year, Dover 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.

Meanwhile, 3M is no slouch: This year marks the 55th consecutive year that 3M has increased its dividend, and it has paid uninterrupted dividends to shareholders for an amazing 96 years in a row. And, for Stanley Black & Decker's part, the company raised its payout in July for the 46th consecutive year.

Dividends paid for by slow and steady growth
Of course, no company can maintain long track records of paying and raising dividends without strong profit growth over time, which each of these stocks has proven. Dover's full year 2012 revenue and diluted earnings per share from continuing operations climbed 10% and 11%, respectively, versus the prior year.

Emerson reported 3% underlying sales growth over the first half of the fiscal year, along with 12% growth in diluted EPS over the same period. For the full year, management expects modest underlying sales growth of 1.5%-2.5%, and 3%-6% earnings-per-share growth for the year. In other words, expect another year of slow and steady growth from this industrial stalwart.

3M is an industrial giant whose products, including Post-its and Scotch tape, are fixtures in many industries, including transportation, health care, and technology. 3M grew sales 3% year over year in the second quarter. While that seems like unspectacular growth, it's worth noting that 3M showed strength in each of its business segments. The company's quarterly performance was led by 6% growth in its industrial segment, which caters to the aerospace and automotive industries.

Stanley Black & Decker provides hand tools, power, tools, and products for the health care and engineering industries. It performed strongly in the second quarter, growing sales by 12%. In addition, the remainder of the year is expected to be strong, even amid a difficult global economic climate. The company recently reiterated its expectations for strong organic growth in net sales, of 4%-5%, and $1 billion in free cash flow generation.

Paving the way for long-term wealth
Industrials companies by nature are cyclical, meaning that their fortunes are closely tied to the health of the economy. In recessions, their businesses are very likely to suffer; we saw this unfold as expected during the recent recession.

However, each of these stocks kept their impressive dividend track records intact, even during the dark days of the financial crisis. That serves as a great sign for investors, that management at each of these companies is still committed to providing shareholder returns, whether in good times or bad.

If you've grown weary of nervously hanging on to every market-rattling headline, and are looking for a place to earn reasonable returns for many years, start your research with Emerson Electric, Dover, 3M, and Stanley Black & Decker.

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9/23/2016 4:02 PM
DOV $69.58 Down -1.97 -2.75%
Dover CAPS Rating: ***
EMR $51.92 Down -0.88 -1.67%
Emerson Electric CAPS Rating: ****
MMM $177.39 Down -2.46 -1.37%
3M CAPS Rating: ****
SWK $120.92 Down -2.28 -1.85%
Stanley Black and… CAPS Rating: *****