There's significant turmoil in the industrial sector right now. Companies are navigating a foggy horizon rife with actual and potential tariffs, and the economy is more uncertain than it has been since the height of the coronavirus pandemic. As of April 3, economists at the Federal Reserve Bank of Atlanta project the U.S. gross domestic product (GDP) contracted by 2.8% in the first quarter of 2025 (adjusting for gold imports and exports).
Industrial stocks tend to fluctuate with the economy because they are typically vulnerable to recessions. That doesn't necessarily spell doom and gloom. Many high-quality industrial companies have shown an ability to navigate economic cycles and produce for shareholders over the long haul.
The best evidence of this is dividend growth. Investors should look for companies that have paid and raised their dividends over time, through the ups and downs.
Here are three excellent industrial dividend stocks investors should consider buying this month.
1. Lockheed Martin
For all the headlines over the past several months about efforts to trim spending in the U.S. government, defense contractors have mostly avoided the chopping block. Lockheed Martin(NYSE: LMT) is one of the government's largest defense contractors, with mission-critical equipment and technologies for sea, land, air, and space. Instead, defense spending could remain strong amid geopolitical tensions in Europe and the Middle East. Just days ago, the U.S. Army awarded the company a contract worth up to $4.94 billion for precision-strike missiles.
The long-term growth in U.S. military spending has made Lockheed Martin a dependable dividend stock. Whereas commercial customers can go bankrupt in a recession, selling to the U.S. government is great because the checks are highly unlikely to bounce.
Lockheed Martin has paid and raised its dividend for 22 consecutive years. The dividend yield is currently 2.85%, so investors get meaningful income from Day 1. Plus, the dividend is only about half of 2025 earnings estimates, so investors don't need to worry much about Lockheed Martin's ability to pay.
Lockheed's F-35 Lightning II program is the company's cornerstone project. The U.S. government estimates the F-35 program will cost over $2 trillion over several decades. Analysts estimate Lockheed Martin will grow earnings by an average of about 13% annually over the long term, making the stock a smart buy at its current price-to-earnings (P/E) ratio of 20.
2. Union Pacific
The railroad industry is a wide-moat business in North America, where a small handful of established companies dominate. Union Pacific(NYSE: UNP) is among them. The company operates 32,693 miles of rail across 23 states and several border crossings. Union Pacific transports bulk goods and commodities, like ethanol, coal, and grain, which can't be efficiently moved across land any other way.
Railroads are sensitive to the economy because rail activity will slow down during a recession. This isn't news for railroad companies; Union Pacific manages its balance sheet well. The company has an investment-grade credit rating and has paid and raised its dividend for 18 consecutive years. The current dividend payout ratio is just 45% of 2025 earnings estimates, so there's ample breathing room in case the business dips.
Meanwhile, investors can get a solid 2.2% dividend yield today. Union Pacific could benefit if the U.S. government meaningfully reshores manufacturing over the coming years. Analysts estimate Union Pacific will grow earnings by an average of 10% annually over the long term, roughly on par with management's expectations for the next few years. The stock's P/E ratio (21) is a fair price for a wide-moat company with potential double-digit earnings growth.
3. A. O. Smith
A company doesn't need to be exciting to be successful. A. O. Smith(NYSE: AOS) is a prime example. The company sells water heaters, boilers, and water treatment equipment -- boring products that have made it a dependable dividend stock.
The company has paid and raised its dividends for 31 consecutive years. It's also timeless; A. O. Smith started in the 1800s, and water remains critical to residential and commercial HVAC in developed and emerging markets.
A. O. Smith expects tremendous growth opportunities over the next few decades as middle classes emerge in China and India, where there is still a significant need to invest in modern HVAC and clean water. The stock's dividend isn't huge; it's just over 2%. However, the payout ratio is just 36% of 2025 earnings estimates, and analysts anticipate the company's earnings will grow by an average of 12% annually over the long term.
In other words, the dividend should grow faster than inflation for the foreseeable future, rewarding shareholders with a mix of dividends and price appreciation. Additionally, A. O. Smith is a compelling value at its current price. The stock's P/E ratio (18) makes it a table-pounding buy, assuming the business grows as analysts expect it to.
Sometimes, boring is beneficial.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends A. O. Smith and Union Pacific. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
