{"id":78075,"date":"2023-10-29T05:08:00","date_gmt":"2023-10-29T09:08:00","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/illinois-tool-works-is-a-fascinating-dividend-king-nyseitw\/"},"modified":"2023-10-29T05:08:09","modified_gmt":"2023-10-29T09:08:09","slug":"illinois-tool-works-is-a-fascinating-dividend-king-nyseitw","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=78075","title":{"rendered":"Illinois Tool Works Is A Fascinating Dividend King (NYSE:ITW)"},"content":{"rendered":"
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Introduction<\/h2>\n

It’s time to talk about one of the few dividend kings on the market. Illinois Tool Works (NYSE:ITW<\/span>)<\/strong> is one of the most fascinating cyclical dividend stocks on the market. Not necessarily because of its products but because of the way this company generates value.<\/span><\/p>\n

The company, which has hiked its dividend for more than 50 consecutive years, has grown its revenue by just 16% since 2010! That’s a very poor performance, as the company does not operate in a high-growth industry.<\/p>\n

However, what makes this company so fascinating is its ability to boost margins. Since 2010, the company has grown its free cash flow by 49% and its EBITDA by 127%.<\/p>\n

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\"Chart\"
Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

In this article, I’ll use the company’s recently released earnings and macroeconomic developments to assess the risk\/reward of one of the most consistent dividend stocks on the market that has outperformed the market by a wide margin over the past ten years – despite subdued revenue growth.<\/span><\/p>\n

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\"Chart\"
Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

So, without further ado, let’s get to the details!<\/p>\n

All Eyes Are On The Valuation<\/h2>\n

Usually, I don’t start articles with a look at the valuation. However, I’m making an exception, as this article is aimed to make sense of the risk\/reward for dividend investors.<\/p>\n

Historically speaking, ITW has traded at 20.3x earnings (the blue line in the chart below), which has guided the stock price very well over the past two decades. Currently, ITW is trading at 23x earnings.<\/p>\n

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FAST Graphs<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

This year, analysts expect earnings per share growth to remain flat, followed by a potential surge of 4% in 2024 and 7% in 2025.<\/p>\n

If we incorporate these numbers and a return to 20.3x earnings, we get an expected annual return of 1.6%, which can be seen in the chart above.<\/p>\n

Again, that’s solely based on its historical valuation and EPS outlook.<\/p>\n

Without having taken a look at the company’s numbers, this means two things:<\/p>\n