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The Best Of The Best In Industrial Electrical Equipment: Dividends And Valuation

Published Mon, 11 Feb 2019 01:39:38 -0500 on Seeking Alpha

Image Source: Eaton

Introduction Demand for products in the industrial electrical equipment space is highly cyclical, and industry constituents are exposed to volatile raw material costs, which at times can be difficult to pass along to customers. Tariff-related costs have the potential to impact bottom-line performance as well and should be monitored closely. Product development and quality initiatives are sources of competitive strengths, but rivals often compete aggressively on price to gain share. The industrial electrical equipment market should grow at a GDP-like pace in the developed world and a multiple of that trajectory in emerging markets. We’re neutral on the space.
While the cyclical nature of the end markets served by industrial electrical equipment entities is a key risk, there are some secular trends that are helping drive expected demand growth over the long haul. The growing global population will require an expanding power grid, energy efficiency is a top priority of nations worldwide, and the thirst for productivity is driving demand in industrial automation, which also benefits from factors such as an aging installed base and the low cost of computing and connectivity.
When searching for the best dividend growth ideas, we prefer companies with net cash positions on the balance sheet and robust free cash flow generating capacity. Balance sheet strength is of increased importance to those serving cyclical end markets, as is the case with... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
EATON 81.15   16.1 5.03 2.84 3.50
ABB 18.95   19.0 1.00 0.49 2.60
ROCKWELL AUTOMATION 162.57   20.5 7.92 3.88 2.42


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