2 Dividend Kings Just Declared Dividend Raises. Is Either a Buy?

Key Points

• Both are industrial conglomerates of long standing.

• One of the raises was notably more generous than the other.

• 10 stocks we like better than Dover ›

Every earnings season leaves behind a set of dividend raises, and this one we're now moving past was no exception. Among this season's lifters were two companies that have been hiking their payouts so long and so frequently, they're among the market's very rare Dividend Kings. In other words, they've done the dividend raise dance at least once annually for a minimum of 50 years in a row.

That isn't a simple feat. Both Dover (NYSE: DOV) and Illinois Tool Works (NYSE: ITW) are to be commended not only for achieving this status, but for keeping their raise streaks going. Let's dig in to their latest bumps, and see whether either or both are buys with the increased payouts.

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1. Dover

Dover made its yearly dividend raise in early August. Although it wasn't one of the company's biggest lifts -- at less than 1% higher than its predecessor, to a quarterly rate of $0.52 per share -- it was meaningful, as it marked the 70th(!) year in a row that the payout has been enhanced.

Such a miserly raise might falsely indicate that the industrial conglomerate is struggling. In late July, it published second-quarter results that showed growth in the right places, with both revenue and profitability rising at healthy rates. The company's revenue advanced by 5% year over year to $2.05 billion, while its non-GAAP (adjusted) net income rose a meaty 16% to $337 million.

Dover management has recently focused on boosting its higher-margin products, while at the same time being aggressive about reining in costs -- hence the double-digit profitability rise.

The company is also choosing to grow through acquisition. Early in August, it announced that it had purchased fueling site monitoring products specialist Site IQ, which has been folded into its new owner's fueling solutions unit.

Although Dover is a well-managed company, I don't feel it's all that compelling as an investment, despite its Dividend King status. Its dividend policy isn't very generous these days, so yield is low (at under 1.2%), and I can't imagine that the company will keep posting such impressive growth rates in key fundamentals in the long term. I'd sit on the sidelines with this stock.

Dover's new dividend will be handed out on Sept. 15 to investors of record as of Aug. 29.

2. Illinois Tool Works

Another post-earnings dividend raise came from Dover's fellow industrial stock, Illinois Tool Works. As August kicked off, ITW boosted its quarterly payout by 7%, or $0.11 per share, to $1.61.

While the company's name implies that it's purely a tool manufacturer, it's actually, like Dover, quite a well-diversified business that operates in several industrial fields. These include automotive, test and measurement electronics, food equipment, and polymers.

It isn't easy to discipline so many different elements into growth, and ITW's most recent quarterly figures reflect this. Revenue for its second quarter inched up only 1% year over year to $4.1 billion, while adjusted net income also slipped at roughly that rate to $755 million. A slightly happier development was management's raising the lower end of its full-year 2025 GAAP earnings guidance.

In proffering revenue guidance that the top line should rise by 3% at best this year, ITW divulged that it'll likely continue "on-going pricing actions that are projected to offset tariff cost impacts and current foreign exchange rates." This sounds like a company in defense mode, rather than a business striding confidently into a high-growth future.

That said, ITW's dividend is relatively high, with the new payout yielding a theoretical 2.5% on the most recent closing share price. That, plus management's tendency to enact generous dividend raises every year, makes it a fine income stock. I wouldn't count on the company growing its fundamentals significantly, though.

ITW's upcoming payout is scheduled for distribution on Oct. 10. Stockholders of record as of Sept. 30 will be eligible for the dividend.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Illinois Tool Works. The Motley Fool has a disclosure policy.