3 Dividend-Paying Industrial Stocks to Buy Now

Investors looking for a good source of long-term dividend growth stocks should take a closer look at the industrials. This sector has a surprisingly large number of stocks with very long histories of raising dividends each year.

These three industrials stocks have raised their dividends for at least 10 consecutive years, and have the ability to produce long-term growth through the full economic cycle.

What Dividends Can Do for You

United Parcel Service UPS, founded in 1907 and headquartered in Atlanta, GA, is a logistics and package delivery company that offers services including transportation, distribution, ground freight, ocean freight, insurance, and financing. Its operations are split into three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight.

On April 23, UPS reported first-quarter 2024 results for the period ending March 31, 2024. For the quarter, the company generated revenue of $21.7 billion, a 5.3% year-over-year decrease. The U.S. Domestic segment (making up 67% of sales) saw a 5.0% revenue decrease, with International also posting a 6.3% revenue decrease, and Supply Chain Solutions seeing a 5.3% decrease.

Adjusted net income equaled $1.43 per share, down 35% year over year. UPS reaffirmed its guidance, expecting revenue of $92.0 billion to $94.5 billion, along with a consolidated adjusted operating margin of 10.0% to 10.6%. Additionally, leadership expects capex of $4.5 billion.

UPS has been experiencing a number of benefits in recent years. One such tailwind is e-commerce, which leads to growth in the number of packages that must be transported across the country. A strong economy drives demand for UPS’ services by businesses as well as by consumers, which increase their spending due to higher disposable incomes. With online shopping growth continuing to outpace brick-and-mortar growth for the foreseeable future, UPS should continue to benefit from strong demand for its services.

UPS is the largest logistics/package delivery company in the U.S. Its top peers include FedEx FDX, DHL Express, and the United States Postal Service. The long-term macro environment is beneficial for the whole industry, thanks to the megatrend of online shopping.

UPS announced it increased its quarterly dividend by one penny to $1.63 on January 30, marking its 15th consecutive annual increase. The 2024 expected dividend payout ratio is 80%, which is relatively high given the expected EPS decline. However, assuming earnings growth recovers in 2025 and beyond, the dividend payout appears sustainable.

UPS stock currently yields 4.6%.

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Keep Your Dividend Income on Track

Trinity Industries TRN is a leading provider of rail transportation products and services in North America. The business of the company is classified primarily under two reporting segments: Railcar Leasing, which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; and the Rail Products Group, which manufactures and sells railcars and related parts and components and provides railcar maintenance and modification services.

In the 2024 first quarter, Trinity generated revenue of $810 million, beating analyst estimates by $59 million. Earnings per share of $0.33 beat expectations by $0.11 per share. Quarterly revenue increased 26% year over year. Rising external deliveries and higher lease rates accounted for the growth. The Railcar Leasing and Services segment led the way with 22% year-over-year revenue growth.

Looking ahead, future growth seems likely as the company reported railcar deliveries of 4,695 and new railcar orders of 1,880.

For 2024, Trinity Industries projects continued growth and improvement in its business operations, setting an EPS guidance range of $1.35 to $1.55. This forecast reflects anticipated improvements in margins across its segments. The company estimates industry railcar deliveries to be around 40,000 units.

Additionally, Trinity plans to invest between $300 million and $400 million in its lease fleet and has allocated $50 million to $60 million for manufacturing capital expenditures.

We maintain our EPS growth forecast of 8% over the next five years, leading to our estimated EPS of $2.06 by 2029. Moreover, the company has a solid record of paying dividends despite operating in a cyclical sector, as Trinity Industries has paid increasing dividends for the past 14 years.

TRN stock currently yields 3.7%.

Collect Another 'Check'

Paychex, Inc. PAYX which was incorporated in 1979, provides payroll accounting, benefits and human resource services to businesses that employ between 10 and 200 employees. Paychex provides services to more than 700,000 small and medium-sized businesses, primarily in the U.S. The company operates two segments: Management Solutions, which provides employers with payroll and retirement resources, and PEO & Insurance, which offers outsourced human resource services and insurance.

On April 2, Paychex announced earnings results for the third quarter of fiscal year 2024 (the company’s fiscal year ends May 31). For the quarter, revenue grew 4.3% to $1.44 billion, but this was $20 million below expectations. Adjusted EPS of $1.38 compared to $1.29 in the prior year and was $0.01 more than anticipated. For the quarter, Management Solutions experienced revenue growth of 2% to $1 billion. This segment benefited from strength in clients served and increased product penetration.

PEO & Insurance Solutions grew 8% to $345.5 million due once again to a higher number of average employees per worksite and increases in insurance revenue. Interest on funds held for clients was up 25% to $43.9 million. As of the end of the quarter, Paychex held $1.8 billion in cash and equivalents against short-term and long-term borrowings, net of debt issuance costs, of $817 million.

Paychex provided revised guidance for fiscal year 2024 as well. Revenue is now projected to grow 5% to 6% for the fiscal year. Adjusted EPS are expected to increase 10% to 11%. Paychex grew earnings at a rate of 10.7% per year over the past decade. As long as unemployment is low, Paychex should see earnings continue to grow.

Paychex’s primary competitive advantage is that it is a leading provider of payroll, account, benefits, and human resource services for small and medium sized companies. Another advantage is that Paychex has very little long-term debt on its balance sheet.

PAYX has increased its dividend for 12 years and currently yields 3.0%.

At the time of publication, Ciura had no positions in any stocks mentioned.