In medieval Europe, a humble pie was considered nutritious public food and sold more but hardly ever grabbed the headlines or captured the public imagination. A modern world stock market equivalent would be the industrial sector. The sector does not provide glamorous, futuristic product offerings like electric cars and artificial intelligence but is arguably the backbone of the economy. If there weren’t any railroads to transport products to market, or pipes and furnaces to run manufacturing units, operating the other fancied sectors would be next to impossible.
Recent industrial sector performance suggests the economy may be gaining traction. The S&P 500 Select Sector SPDR for Industrials (XLI) has been one of the success stories of the year, with investors turning bullish on the sector. XLI has progressed 13.3% year to date and grown 17.6% over the last 12 months, as of Jul 31, 2023.
In July, total industrial production increased 1%, following declines in the previous two months. Manufacturing output rose 0.5% in the same period. Also, with the reduced likelihood of the Federal Reserve hiking interest rates in its next meeting or the meeting after, the industrial sector is likely to get a further boost. This is because rising costs of essentials like copper and crude oil adversely impact the sector, and the absence of that entails good news.
It will be thus prudent to invest in Industrials as the tight monetary policy regime comes to a gradual end, and the defensive nature of the sector takes over. Even if the economy enters a period of recession, the sector might be the wheels to take it out of the mud. Big players in the sector are also known to distribute dividends and thus provide a steady source of income for investors.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy) and regularly pay dividends to shareholders. The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Caterpillar Inc. CAT is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
Caterpillar’s expected earnings growth rate for the current year is 43.2%. The Zacks Consensus Estimate for its current-year earnings has improved 11.1% over the past 60 days. This Zacks Rank #1 company has a dividend yield of 1.8% and a VGM Score of B.
3M Company MMM provides diversified technology services in the United States and globally. Safety and Industrial, Transportation and Electronics, Health Care and Consumer are its four major operating segments.
3M’s expected earnings growth rate for the next year is 9.3%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. This Zacks Rank #2 company has a dividend yield of 5.6% and a VGM Score of B.
PACCAR Inc PCAR is in the business of designing, manufacturing and distributing light, medium, and heavy-duty commercial trucks in the United States. It has three operational segments, Truck, Parts and Financial Services.
PACCAR’s expected earnings growth rate for the current year is 48.5%. The Zacks Consensus Estimate for its current-year earnings has improved 8.9% over the past 60 days. This Zacks Rank #2 company has a dividend yield of 1.3% and a VGM Score of A.
Masco Corporation MAS is a global manufacturer of home improvement and building products and also operates in the new home construction market.
Masco’s expected earnings growth rate for the next year is 10.5%. The Zacks Consensus Estimate for its current-year earnings has improved 7.5% over the past 60 days. This Zacks Rank #1 company has a dividend yield of 1.9% and a VGM Score of B.
Caterpillar Inc. (CAT): Free Stock Analysis Report
3M Company (MMM): Free Stock Analysis Report
Masco Corporation (MAS): Free Stock Analysis Report
PACCAR Inc. (PCAR): Free Stock Analysis Report
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