We recently published a list of the 10 Best Dividend Monarchs to Invest in Now. In this article, we are going to take a look at where Illinois Tool Works Inc. (NYSE:ITW) stands against other best dividend monarchs.

Dividend-focused investors are generally well-acquainted with terms like Dividend Aristocrats and Dividend Kings, but many may not be aware of a lesser-known group called Dividend Monarchs. While they fall under the broader category of dividend growth stocks, they carry a distinct title. The Dividend Monarchs Index highlights US companies that have managed to raise their dividends consistently for at least 50 consecutive years. These firms have weathered decades of market ups and downs, showcasing both resilience and steady performance in terms of dividend growth and stock returns. As an evolution of the well-known S&P Dividend Aristocrats Index Series, the S&P Dividend Monarchs Index sets an even higher standard, recognizing a more exclusive tier of long-term dividend payers.

S&P Dow Jones Indices has been a pioneer in dividend growth strategies since the 1980s, initially tracking US companies with at least 10 years of dividend increases. As the number of such companies grew, the threshold was raised to 25 years, forming the basis for the Dividend Aristocrats Index, launched in 2005. This index became a widely recognized benchmark, eventually expanding to include mid- and small-cap stocks as well as global markets. By April 2023, over $40 billion in ETF assets tracked these indices. With a rising number of companies now surpassing 50 consecutive years of dividend growth across different market caps, S&P introduced the Dividend Monarchs Index in 2023 to reflect this new elite group.

The key distinction between Dividend Kings and Dividend Monarchs lies in the inclusion criteria. While both require at least 50 consecutive years of dividend increases, Dividend Monarchs must also meet specific standards set by S&P. To qualify for the Dividend Monarchs Index, a company must be part of the Composite 1500, have a float-adjusted market capitalization of at least $2 billion, maintain a three-month average daily trading value of $5 million or more, and consistently grow its dividend over five decades. This added layer of eligibility makes Monarchs a more selective, index-based group.

Companies that meet the tough 50-year dividend growth requirement tend to show strong profitability and financial stability. According to an S&P Dow Jones Indices report dated April 30, 2023, the Dividend Monarchs Index outperformed both the broader market and the S&P Composite in terms of return on equity (ROE) and showed more consistent earnings. The report also noted that, based on back-tested data since January 31, 2018, the Dividend Monarchs Index displayed more defensive traits—offering lower volatility and smaller drawdowns than the S&P 500 during market declines.

Although the Dividend Monarchs Index is a relatively new concept with only five years of back-tested performance, it has grown significantly during that time, expanding from 11 to 35 constituents. Despite the index’s short history, the companies included have a track record of at least 50 consecutive years of dividend growth, dating as far back as 1972. According to data presented by S&P Dow Jones Indices, the performance of these companies—measured through both price returns over the past 50 years and total returns since December 1989—has generally outpaced that of the broader market. This suggests that many of the index’s constituents have delivered stronger long-term results.

A factory in operation, its machinery humming as new industrial products get built.

Our Methodology

For this list, we scanned the holdings of the S&P Dividend Monarchs Index, which tracks the performance of companies with 50 consecutive years of dividend growth. From that list, we picked 10 stocks that were most popular among hedge funds, as per Insider Monkey’s Q4 2024 database. The stocks are ranked in ascending order of the hedge funds having stakes in them.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Illinois Tool Works Inc. (NYSE:ITW)

Number of Hedge Fund Holders: 49

Illinois Tool Works Inc. (NYSE:ITW) is an American diversified industrial company that operates in a wide range of segments. The company is deeply rooted in the industrial economy and stands out for its broad diversification, which serves as a key advantage—particularly as the market moves away from traditional conglomerate structures. Each of its segments operates with strong profit margins and represents only a modest portion of the overall business. This structure allows the company to remain resilient, as it can withstand slowdowns in individual segments without significantly impacting the broader business.

In the fourth quarter of 2024, Illinois Tool Works Inc. (NYSE:ITW) reported $3.9 billion in revenue, marking a 1.28% year-over-year decline and falling short of analyst expectations by more than $50 million. Despite the revenue miss, the company’s GAAP earnings per share rose 7% to $2.54. The operating margin improved to 26.2%, with enterprise initiatives contributing significantly—adding 120 of the 140 basis-point increase.

Illinois Tool Works Inc. (NYSE:ITW) also maintained a strong financial position, generating $1.1 billion in operating cash flow and achieving a record free cash flow of $1 billion, up 10% with a 133% conversion rate. Looking ahead to FY25, the company expects free cash flow to surpass net income and plans to repurchase about $1.5 billion in shares. It also anticipates an effective tax rate between 24% and 24.5%.

Illinois Tool Works Inc. (NYSE:ITW) is one of the best Dividend Monarchs as the company has been growing its dividends for 52 consecutive years. The company currently pays a quarterly dividend of $1.50 per share and has a dividend yield of 2.58%, as of April 15.

Overall, ITW ranks 10th on our list of the best Dividend Monarchs to invest in. While we acknowledge the potential of ITW as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than ITW but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.