With the stock market's recent volatility, it's a good idea to build a shortlist of dividend-paying stocks to buy in the event of more sell-offs. In this context it makes sense to focus on companies with well-covered dividends and good growth prospects. Three such stocks are aerospace giant Raytheon Technologies (NYSE:RTX) and industrial conglomerates 3M (NYSE:MMM) and Emerson Electric (NYSE:EMR). Here's why.

Raytheon Technologies

The commercial aviation market might not be the first place investors choose to look for reliable and growing dividends right now. However, I think that view might be a bit short-sighted when it comes to Raytheon. In reality, the company is generating the majority of its revenue from its defense-focused businesses right now.

Raytheon Missiles & Defense and Raytheon Intelligence & Space support the company with earnings and cash flow while the commercial aerospace businesses (Collins Aerospace and Pratt & Whitney) embark on a multi-year recovery. As such, management expects to generate free cash flow (FCF) of $4.5 billion in 2021, a figure that will easily cover the dividend payout of some $3 billion. 

Missiles being launched.

Image source: Getty Images.

Moreover, CEO Greg Hayes expects Raytheon's FCF to grow to "$8 billion to $9 billion" over the "next several years." Simply put, Raytheon's dividend is sustainable and likely to grow as the company's earnings recover in line with growth in passenger traffic and airplane deliveries. 

3M

On the plus side, 3M has excellent cash flow, a well-covered dividend, an attractive valuation, and upside potential from management's efforts to restructure the company for growth.

On the minus side, 3M has a patchy recent trading history, there's no hard evidence just yet that the restructuring is improving 3M's profitability, raw material costs are rising and eating into margins, and there are questions around its exposure to PFAS liabilities

An investor holding cash in her hands.

Image source: Getty Images.

That pretty much sums up the debate around 3M stock right now. On balance, I think the positives outweigh the negatives. There are two critical arguments behind this view. First, it's a lot easier to engineer a turnaround and restructure a company when you have bundles of FCF coming in. For example, management can engage in mergers and acquisitions, make divestments (the FCF from non-divested businesses will continue to support 3M as it sells non-core businesses), and pay for restructuring activities. Indeed, that's exactly what management is doing right now, notably in the previously underperforming healthcare segment.

The second reason is that many of 3M's end markets (particularly in the "safety and industrial" and "transportation and electronics" segments) are recovering in 2021. The company is coming up against some very easy comparisons with 2020. That should help 3M overcome any headwinds from slower sales of respirators as the pandemic eases.

3M Organic sales growth

Data source: 3M presentations. YOY= year over year. Chart by author.

Wall Street analysts expect 3M to generate $13.4 billion in FCF over the next three years, representing more than 11% of its current market cap. That should give management plenty of firepower to engineer an improvement in 3M's execution.

Emerson Electric

The company has one of the safest dividends in the industrial sector, and its end markets look set for improvement in 2021 and beyond. Management expects $2.7 billion in FCF for 2021, so its $1.2 billion dividend payout is easily covered. Emerson's management is shareholder-friendly and aims to pay 40%-50% of FCF in dividends to investors, with a target of converting 14%-16% of its sales into FCF.

Moreover, Emerson's sales and dividends are likely to grow. The industrial company's three-month trailing orders recently turned positive, and it's on track for underlying sales growth of 3%-6% in 2021.

Emerson orders growth

Data source: Emerson Electric presentations. YOY= year over year. Chart by author.

Thinking longer-term, Emerson's automation solutions segment has a growth opportunity from increasing automation in industrial production. Meanwhile, its oil and gas-related automation solutions should benefit from the increase in the price of oil, encouraging capital investment.

The commercial and residential solutions segment can grow through increasing demand for cold chain solutions in the foodservice and retail sectors. Meanwhile, Emerson's heating and air-conditioning solutions are benefiting from increasing global demand from middle classes in emerging countries and the need to keep commercial buildings clean and healthy in the wake of the pandemic.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.