Source: Corning.

Corning (NYSE:GLW) is an American manufacturing company that focuses primarily on the production of glass products and other materials. Over its 160-year-plus history, it's been responsible for developing glass for Edison's lightbulb, the Hubble Telescope, and the iPhone, among numerous other contributions to society. It has a culture of constant innovation, a shareholder-friendly capital allocation program, and a fair valuation, but does it deserve a place on your watch list? Let's take a look.

A 25% haircut over the last 6 months
I've become used to 25% stock drops from some of the more high-flying names in my portfolio. I don't expect such precipitous falls from dividend-paying manufacturing companies like Corning, but have certainly seen my fair share. Nevertheless, investors shouldn't pay heed to these short-term moves in price when formulating long-term investing decisions.

In the six months prior to the stock reaching its most recent highs, it was up 25%, only to give that all back (and a little bit more) in the subsequent six-month period. Short-term moves like this should only effect investors insomuch as they are trying to build positions over time. If you bought near the top of this recent swing, this drop could be an effective way to fill out your position at lower prices. The overall quality of the company has not drastically changed in the past six months, but your ability to pick up shares in it has.

The stock price could drop further in the short term, or may pop to the upside. Mr. Market can be schizophrenic over the short term, but tends to fairly price businesses over the long term. This is why I try to not deploy all of my capital into a stock at one time. Over time I think Corning is a conservative market beater for the reasons below.

Culture of innovation
I don't have any industrial training or expertise, so picking out a good manufacturing company to invest in requires a little bit of a leap of faith. While I can look at a product pipeline, I can't speak with any real certainty as to how feasible and/or successful those products will be. But what I do know is that Corning has been succeeding for over a century and a half. And it's done so not with one basically unchanged product, like a cigarette or an alcoholic beverage, but through constant innovation.

While that's no guarantee of success, I feel confident that many years from now Corning will still be producing improved versions of industrial products that benefit society and make shareholders money. The heart of this $20 billion-plus company by market cap, after all, remains a 2 million-square-foot R&D center that will drive future iterations of current products as well as the new inventions that will power the company's future. 

Stalwart beats the upstart
Using its proprietary Gorilla Glass formulation, Corning has produced the screen  for every iPhone since 2007. It seemed to be out of a massive contract when Apple prepared to ditch it in favor of a synthetic sapphire crystal screen from GT Advanced Technologies. But GT was unable to meet Apple's rigorous demands, and eventually declared bankruptcy. And Corning was there to pick up the slack. The latest iteration of Gorilla Glass currently shields iPhones as well as nearly every other high-end smartphone on the market. Sometimes it pays to be the "boring and stable," company rather than the new hotshot. 

To that end, Corning has a long history of success with lowering automotive emissions, with what would certainly be considered a boring product. Created in the 1970s, Corning's catalytic converter has been heralded as the worldwide standard. And a recent partnership with Honda illustrates how Corning continues to improve in areas where it's already been wildly successful, with a new ceramic product that will dramatically help reduce emissions during the first 30 seconds after engine start, where Corning says "up to 70 percent of regulated emissions can occur." This product will ship on select 2016 Honda models and shows once again how expertise in ceramics and glass is a durable competitive advantage for Corning and a friend to the Corning investor.

Financials and capital-return plan are strong
All of this talk about the wonderful products Corning produces would mean nothing if the innovation weren't being reflected in the company's financials. So how is it doing? Well, Corning has grown revenue at an average clip of 12.48% and EPS at 6.21% over the past five years. This isn't a company that's going to achieve explosive growth on either the top or bottom line, but it can provide solid performance on both.

Corning currently sports a 2.5% dividend yield, with a payout ratio of only 23.4%. Expanding net income and a low payout ratio ensure that not only is the dividend safe for the foreseeable future but that more yearly increases are very likely. The quarterly payout has more than doubled in the past five years, from $0.05 per share in 2010 to $0.12 in the latest quarter.

Corning is buying back shares effectively, too. Corning has drastically reduced its total share count, from 1.58 million in 2010 to 1.43 million on a TTM basis. This nearly 10% drop in shares outstanding allows for greater dividend payouts and higher EPS for remaining shareholders.

Valuation is fair
Corning isn't an explosive growth stock and thus doesn't deserve a lofty valuation. It currently trades for only 11.5 times forward earnings, compared with the 18.3 average for the S&P 500. Moderate growth in net income, a solid and growing dividend, and aggressive share repurchases should provide satisfactory returns to shareholders with a long-term perspective. A solid dividend payer with a rich history and promising future and that trades at a significant discount to the overall market is worth a deeper look for a potential place in your portfolio.