Industrial stocks were among the hardest hit during the COVID-19 pandemic. Dividend suspension and cuts was a major fallout, and companies across the sector, right from aerospace and automotive giants Boeing and Ford Motor to construction-equipment manufacturer Terex, were forced to take the plunge.
Remarkably, some industrial stocks didn't just pay out a regular dividend but even increased it despite the tough times! Below are two such incredible dividend-paying industrial stocks that have displayed great resiliency and make for top picks today if you want to bet on the recovering industrials sector.
The silent multibagger stock
If you overlooked Waste Connections (WCN 0.15%) stock because of its tiny yield of 0.8%, you've missed out on some big returns. This chart is proof of not just Waste Connections' solid 10-year returns but also how it handily beat popular rival and leader in the industry, Waste Management (WM 0.34%). Surely, Waste Connections is doing something right.
Waste Connections is the third-largest solid waste management company in North America. While the resilient nature of its business has undeniably helped the company ride out economic upheavals, two things have helped it beat competition. First, Waste Connections has a solid foothold in the energy sector. Its subsidiary, R360, is a key waste management service provider in oil basins like Permian, Eagle Ford, and Bakken. Second, Waste Connections acquisitive strategy has hugely helped it expand footprint. R360, which it acquired in 2012, is one of the best examples. In 2020, Waste Connections added nearly $180 million in annualized revenue through acquisitions.
Waste Connections defied the COVID-19 slowdown and raked in strong cash flows in 2020, encouraging management to announce 10.8% increase in dividends. That marked its 10th straight year of double-digit dividend increases, starting 2010 when the company first initiated a dividend.
With management projecting higher pricing and 5% growth in volume in 2021, investors in Waste Connections can expect another big dividend hike later this year, making it a solid stock to own at all times.
5 reasons 3M is a great dividend stock
3M (MMM 3.60%) has always been popular among income investors thanks to its incredible record of 63 years of consecutive annual dividend increases, but its latest dividend hike of only 1% announced earlier this year miffed investors. If you ask me, it shouldn't have, as even with that small hike, 3M remains one of the most reliable dividend stocks to own for several reasons.
First, 3M suspended its share repurchase program last year but not dividends, affirming management's commitment to dividends. That security is essential for any long-term dividend investor. Second, in a prudent move, 3M shifted focus to cutting costs and deleveraging its balance sheet as the pandemic raged, and paid down debt worth $1.5 billion in 2020. A stronger balance sheet is one big reason why 3M could increase dividend at a time when several companies suspended theirs.
Third, 3M proved its agility and innovative capabilities yet again when it found an opportunity amid the challenges and rapidly scaled global production of N95 respirators. In the U.S. alone, it started producing 95 million respirators a month, compared with only 22 million a month in 2019. Overall, 3M supplied 2 billion masks globally in 2020.
Fourth, 3M's end markets are visibly improving, as evidenced by its 2021 guidance of 5%-8% growth in sales. That should not only boost 3M's bottom line and share price but also give management the leeway to dole out a bigger dividend hike. Fifth and most important, 3M's latest dividend increase may not entice, but it offers a generous dividend yield of 3.3% today.
In short, there's a lot to like here, particularly the safety and reliability of 3M's dividends.
The perfect mix of safety and growth
Clearly, both Waste Connections and 3M are excellent dividend growth stocks. But there's one key difference that might help you choose between the two stocks. Waste Connections is an all-weather stock and, therefore, perfect if you want to play it safe. Dividend King 3M, on the other hand, is a play on the economy given its megaconglomerate structure, so you might love it you love taking risks. Eventually, both stocks should ensure a steady flow of passive income for you for years to come.