5 Top Industrial Stock Recommendations

Oct 26, 2023 By Triston Martin

The importance of industrial stocks in a well-rounded investing portfolio must be addressed. Classic industrial titans provide stability, dividend performance, and global centrality. The world economy depends on industrial stocks. As companies hire more people and spend more money, industrial businesses become important suppliers that keep the economy going.

Industrial stocks are different because they strategically spread their bets across various business lines and regions, making them less dependent on a single product or group of customers. This way of diversification keeps earnings stable during economic downturns. Even though they aren't as flashy as Wall Street stocks, industrial stocks appeal to investors who want steady results.

The Economy's Dependence on the Industrial Sector

The industrial sector stocks serve as the bedrock of any economy, encompassing diverse activities fundamental to economic growth and development.

Manufacturing and Distributing Capital Goods

This function involves producing and disseminating essential capital goods vital for the economy's infrastructure and development.

Building Products and Machinery

Manufacturing companies within the industrial sector stocks produce a wide range of products essential for infrastructure and development, such as building materials, machinery, and equipment used in construction and various industries.

Providing Commercial and Professional Services

In addition to manufacturing, industrial stocks offer a spectrum of vital commercial and professional services necessary for businesses to operate efficiently and effectively.

Environmental and Facility Services

These services include waste management, environmental cleanup, facility maintenance, and energy management. They are indispensable for maintaining a safe and sustainable working environment.

Human Resources and Employment Services

Industrial companies provide HR solutions, including talent recruitment, workforce training, and employment consulting, aiding businesses in managing their human capital effectively.

Providing Transportation Services

Transportation is a pivotal function of the industrial sector, ensuring the efficient movement of goods and people.

Best Industrial Stocks

1. ABB

Electric systems giant ABB, worth $63.2 billion, is a major industrial player. The firm makes and sells automation, robotics, EV and renewable power systems, manufacturing, and mining equipment.

Like many industrial stocks, ABB is a "cyclical" corporation, meaning its profitability and sales depend on the economy. Diversification is its strength. ABB services clients of all sizes in many industries and regions. Diversification creates a solid baseline demand for its products and services, adding reliability. ABB outperformed the market in 2023 despite being cyclical. ABB's strategic presence in high-tech industries, including EV charging stations, robots, and solar panels, bodes well. ABB stands out in the industry for its dependability and growth potential.

Dynamic and relevant in high-tech, ABB stands apart from traditional industrial firms and one of the best in industrial stocks. ABB's forward-thinking approach might yield high profits, unlike other industrial equities. ABB may appeal to industrial investors seeking stability and growth.

2. Caterpillar

Industrial powerhouse Caterpillar has a market worth of $110.3 billion. The company's sales and earnings fluctuate with the economy.

Caterpillar's capabilities make it a strong pick despite the challenging global economic prospects in 2023. China's COVID policy reforms might relieve pent-up demand since 20% of its sales originate from Asia-Pacific. This may enhance the firm temporarily.

Caterpillar is one of the strongest dividend growth stocks, with over 30 years of yearly payment increases. This long-term shareholder commitment shows the company's durability and loyalty. CAT also authorized a significant share repurchase program to deliver wealth to investors.

Caterpillar's shareholder value, diversification, and strategic positioning make it an appealing industrial company. The company's resiliency and potential Asia-Pacific market tailwinds make it a good pick for industrial investors seeking stability and development.

3. Automatic Data Processing

Automatic Data Processing (ADP), valued at approximately $88.7 billion, operates as a vital human resources and payroll platform deeply ingrained in numerous businesses worldwide and industrial stocks. Its operations are significantly linked to business creation and employment trends, making it an essential player in the global economy.

ADP stands out as one of Wall Street's top dividend stocks primarily due to its desirable reliability. The company has demonstrated consistent performance year after year, reflected in its ability to sustain a remarkable 48-year streak of consecutive annual dividend increases. ADP bolstered investor confidence with a notable 20% surge in its quarterly dividend at the end of 2022, highlighting its unwavering commitment to shareholder value.

Consensus forecasts indicating about 9% revenue growth this year and a further 7% growth in fiscal 2024 affirm the company's resilience and thriving stance, even in a challenging environment.

ADP's remarkable dividend track record, resilient business growth, and long-term stability make it an appealing option for investors seeking reliable returns and consistent performance within the best industrial stocks.

4. Illinois Tool Works

Illinois Tool Works (ITW), a $69.9 billion equipment behemoth, is a reliable industrial company with long-term stability and income potential.

ITW manufactures automobile components, food service equipment, welding gear, and high-tech test and measurement systems. Diversification reduces the company's dependence on one product or industry, improving its resilience and stability. ITW's shareholder devotion is notable. The Dividend King has raised dividends for 59 years since 1933. Investors value the guarantee of rising dividends over time above a low headline yield.

ITW will be affected by global economic trends, but patient investors may trust the stock's long-term value development potential. ITW's solid history, varied manufacturing capabilities, and constant dedication to shareholder value make it an ideal industrial stock pick for stability and development.

5. Raytheon Technology

Strategic mergers and acquisitions have helped Raytheon Technologies (RTX), a $145.6 billion aerospace and military company, expand its product line and reduce costs.

RTX has grown steadily through mergers and acquisitions to extend its product line and reduce costs. RTX became an aerospace and defense powerhouse after Raytheon and United Technologies merged in 2020, enabling strategic realignments and expansion. With roughly 10% organic sales growth expected this year and next, RTX has lofty growth ambitions. The potential cost savings to boost profitability and shareholder value are attractive.

An above-average dividend yield and a late 2022 $6 billion stock repurchase plan show RTX's commitment to shareholders. These efforts improve the aerospace and defense investment pitch, promising growth and profits.

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