The industrials sector spans a range of products and services related to manufacturing, transportation, industrial machinery, and defense. One defining characteristic of the sector is its high cyclicality. Performance is also tied closely to government spending and infrastructure investments.

Dividend investors seeking safety in the sector often look to aerospace and defense, waste management, and commercial services stocks, which aren’t as closely tied to economic cycles as others in the sector, or have high barriers to entry.

The companies in our industrial stocks list include stocks traded on the NYSE or NASDAQ exchanges, many of which are also S&P 500 and Dow Jones Industrial Average constituents.

Using our lists to find industrial dividend stocks

Our customizable stock lists simplify finding, researching, and comparing the best industrial stocks for your portfolio. Search through the stock data set to compare key metrics for dividend investors and then dive deeper into your research by selecting any stock to review in-depth stats and fundamentals.

Also, use our stock comparison tool to compare essential stats for a hand-picked selection of stocks.

Industries

The industrial sector covers a wide range of products and services, which also explains the large number of industries in the sector. Industries in the sector include the following.

• Aerospace and defense: Companies that manufacture aircraft, spacecraft, defense systems, and military equipment.
• Agricultural machinery: Producers of farming machinery, irrigation systems, and equipment used in crop production, livestock management, and agribusiness operations.
• Airlines, airports, and air Services: Businesses involved in commercial and cargo air transportation, airport operations, and aviation-related services.
• Business equipment & supplies: Companies manufacturing and distributing office equipment, commercial printing, and workplace essentials.
• Industrial conglomerates: Large corporations that operate in multiple industrial segments, often spanning manufacturing, transportation, and technology.
• Construction: Companies that manage commercial, residential, and infrastructure building projects. Their work includes everything from large-scale civil projects to housing developments.
• Consulting services: Firms that provide professional advice and expertise in industrial processes, infrastructure development, and operational efficiencies.
• Electrical equipment and parts: Manufacturers of electrical components, power distribution equipment, and automation systems used in industrial and commercial settings.
• Engineering and construction: Companies specializing in large-scale infrastructure projects, including roads, bridges, energy facilities, and commercial buildings.
• Industrial - distribution: Businesses that supply and distribute industrial goods, machinery, and equipment to manufacturers and service providers.
• Industrial - freight and logistics: Companies that manage end-to-end supply chain solutions, including warehousing, distribution, and multimodal transportation.
• Industrial - machinery: Companies that design and manufacture heavy equipment and automated systems used in construction, mining, and production processes.
• Industrial - pollution and treatment controls: Providers of environmental solutions, including air and water treatment systems, waste management, and pollution control technologies.
• Metal, manufacturing, and fabrication: Firms that produce industrial goods, tools, and equipment used in various manufacturing processes and supply chains.
• Marine shipping: Businesses engaged in ocean freight transportation, cargo shipping, and port operations for global trade.
• Railroads: Operators of freight and passenger rail networks, providing transportation for raw materials, consumer goods, and industrial supplies.
• Rental and leasing services: Providers of short-term and long-term leasing for industrial machinery, equipment, and transportation vehicles.
• Security and protection services: Companies offering security systems, surveillance technology, and physical protection services for industrial and commercial clients.
• Specialty business services: Niche industrial service providers offering solutions such as facility management, industrial cleaning, and outsourcing support.
• Specialty industrial machinery: Companies that produce specialized machines for niche industrial uses, often serving highly technical end markets.
• Staffing and employment services: Firms specializing in workforce solutions, including recruitment, temporary staffing, and industrial labor management.
• Tool and accessories manufacturing: Produce hand tools, cutting tools, and industrial instruments for contractors, manufacturers, and consumers.
• Trucking: Businesses involved in transporting goods via road freight, including logistics providers and independent trucking fleets.
• Waste management: Companies responsible for waste collection, recycling, landfill operations, and environmental sustainability services.

How to invest in industrial stocks

Pros of the sector

• Strong, consistent dividend growth potential, explaining why several stocks in the sector are dividend aristocrats
• Exposure to economic growth and infrastructure investments
• Competitive moats with high barriers to entry

Cons of the sector

• Highly cyclical
• Capital-intensive
• Interest rate risk can be considerable due to reliance on debt financing

Two common ways investors gain exposure to industrials stocks are through individual stock ownership and industrial ETFs offering broader sector exposure.

For individual stock ownership, there are several key factors to pay close attention to when analyzing these investments.

Fundamentals and valuation

Industrial companies tend to be capital-intensive. Accordingly, it’s important to analyze free cash flow, efficiency ratios such as return on equity (ROE) and return on assets (ROA), margins, debt to equity (D/E), and revenue growth.

Leading industrials companies often outperform their peers with comparably higher margins, which allows them to invest more of their profits efficiently, generating sustainable cash flow that reduces the need to rely on debt financing to support dividend payments and reinvestment for growth.

The price-to-earnings (P/E) ratio is reliable for valuing industrial stocks that generate stable earnings. Price-to-free-cash-flow (P/FCF) and enterprise-value-to-EBITDA (EV/EBITDA) can provide similar reliable insights since they demonstrate the cash-generating power of cyclical businesses while also considering capital structure inputs.

Macroeconomic considerations

Short-term investing in the industrials sector is a bet on economic cycles, but that’s not the ideal way to invest in any sector - long-term outlooks are critical for investing success.

With this in mind, several key macroeconomic considerations exist, including economic growth, government policy and infrastructure investments, and prevailing interest rates.

The sector is primarily driven by GDP growth, fueling demand for infrastructure, equipment, and transportation when economies grow.

Public infrastructure investments and government policy can also play a key role in select corners of the sector, especially companies exposed to the upside benefits of infrastructure and transportation bills.

Prevailing interest rates can’t be ignored either, since the sector is characterized by capital-intensive companies relying on debt financing for large capital expenditure investments. Rising interest rates can slow growth and pressure margins, potentially affecting dividend safety.

The Purchasing Managers’ Index (PMI) is a helpful leading indicator that considers many of the mentioned macroeconomic factors, providing early signals for whether cyclical sectors are shrinking or growing. A reported PMI value above 50 indicates expansion, whereas a value below 50 indicates contraction.

Popular industrials dividend stocks

Suppose you’re searching for the best industrial dividend stocks to buy. In that case, it may be worth considering several names dividend investors covet with years of consistent payouts and dividend growth.

Such companies include Caterpillar Inc. (CAT), Lockheed Martin Corporation (LMT), Union Pacific Corporation (UNP), 3M Company (MMM), Deere and Company (DE), and Waste Management Inc. (WM).

Popular industrials ETFs

Popular sector-wide industrial ETFs include the Industrial Select Sector SPDR Fund (XLI), Vanguard Industrials ETF (VIS), and iShares US Industrials ETF (IYJ).