Don’t be fooled by these companies’ modest dividend yields.

In times of high market volatility, it can be reassuring to fall back on timeless investing fundamentals. One of the simplest ways to compound wealth over time is by investing in quality companies in growing industries. Large companies like Deere ( DE -2.26%), Emerson Electric ( EMR -3.76%), and Eaton ( ETN -4.71%) may not pay the highest dividends. But they have proven that they can grow earnings and their payouts over time.

Long-term investors care less about what a stock’s dividend yield is today and more about the company’s relevance and prospects. Here’s what makes these three industrial stocks worth owning now. Image source: Getty Images. Deere is firing on all cylinders

Daniel Foelber (Deere): Deere reported an excellent fiscal 2022 third quarter and is on track to deliver record net income of $7 billion to $7.2 billion for the full fiscal year. At face value, Deere’s record year can be attributed to strong commodity prices, which have boosted investment in Deere’s end markets across agriculture, forestry, and construction. However, the bigger story is Deere’s pricing power, which has successfully offset inflation headwinds.

For the full-year fiscal 2022, Deere is forecasting 14% higher price realization in its largest segment, production and precision agriculture, as well as 9% higher price realization in small agriculture and turf, and 10% higher price realization in construction and forestry.

As excellent as Deere’s business is performing now, one single banner year isn’t enough to justify a long-term investment thesis . But Deere has much more going for it than its fiscal 2022 results. The company’s research and development expense is at an all-time high as it puts capital to work in automation, electrification, and artificial intelligence solutions.

Deere’s 2022 investor presentation centered around the company’s belief that farmers are going to have to do more with less. Past growth was centered around expanding out. Deere believes future growth will be about efficiency. Put another way, generating higher crop yield from the same parcel of land and sustainably developing that land for longer.

Deere’s blend of short-term success, in-house software and hardware , and premium brand power make it one of the more unique companies in that it combines legacy industrial roots with aggressive investments in technology. Investors should note that Deere prioritizes a strong balance sheet and growth investments over dividends and share buybacks. For folks who like dividend stocks but are more focused on a company’s growth than its passive income stream, Deere could be a great buy now. And in the long run, its growing dividend could prove to be an even greater source of passive income than companies with a higher yield today but weaker growth prospects. Emerson Electric is a good value stock

Lee Samaha (Emerson Electric) : Down 6.5% in 2022, and with some poetic symmetry that is lost on me, the Dividend Aristocrat is in its 65th year of raising its dividend. However, poetry isn’t just the reason for buying Emerson Electric. There are three other key reasons to buy the stock. First, Emerson is a good value stock trading at 17 times the midpoint of management’s earnings guidance for 2022. Moreover, the forecast earnings per share of $5.05 to $5.15 mean its dividend of $2.05 per share is covered 2.5 times.

Second, Emerson’s end markets have substantial long-term growth prospects . Its automation-solutions business benefits from the ongoing need for investment in energy, refining, and heavy industries. Meanwhile, its commercial and residential-solutions business (a loose collection of heating, ventilation, and air conditioning, or HVAC, solutions and tools and home-products businesses) benefits from global growth in HVAC. The latter is driven by increased urbanization (urban areas tend to be warmer than rural ones) and demand for HVAC from the growing middle classes in the emerging world.

Finally, Emerson has an opportunity to improve profitability by divesting its non-core businesses. For example, CEO Lal Karsanbhai wants to divest some of its upstream oil and gas-focused businesses. Another example comes from the recent announcement of an intent to sell its food waste disposal business, InSinkErator, to Whirlpool for $3 billion. All told, there’s plenty of opportunity for growth, and the modest valuation makes Emerson look like a good-growth-at-a-reasonable-price candidate. Buying this blue chip can charge up your portfolio

Scott Levine (Eaton Corporation) : Falling nearly 16% since the start of the year, shares of Eaton haven’t been on the same trajectory that saw them rise 44% in 2021. That’s not to say that anything is fundamentally […]

source 3 Monster Blue Chip Dividend Stocks That Are Bursting With Passive Income Potential

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