Illinois Tool Works (ITW) 2013 Review

Illinois Tool Works manufactures industrial products and equipment for the transportation, construction, power systems and electronics, industrial packaging, food equipment, polymers and fluids incorporating over 800 businesses in 58 countries. It has generated an 11-20% return of equity and has grown earnings and dividends at a 10-13% rate over the past 10 years.  As might be expected for a company serving the housing and automotive markets, ITW experienced a significant decline in earnings in 2009.  However, this high quality, well managed company  witnessed a rebound in 2010 and  resumed its prior growth path as a result of:

(1) the company’s aggressive acquisition program,

(2) focus on cost reduction,,

(3) new product development as well as a continual broadening of its product lines,

(4) an ongoing stock buyback program.

Negatives:

(1) it is in a highly competitive industry,

(2) a significant portion of its business is international thereby exposing it to currency risk,

(3) several of its major product lines service cyclical businesses.

Illinois Tool Works is rated A++ by Value Line, has a debt to equity ratio of about 31%, and its stock yields approximately 2.2%.

  Statistical Summary

                 Stock     Dividend         Payout      # Increases  

                Yield      Growth Rate     Ratio       Since 2003

ITW           2.2%           8%              36%            10

Ind Ave      1.4               9                21               NA 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2003      Margin       Rating

ITW          31%            18%             2                12%          A++

Ind Ave     21                14              NA               8            NA

 

     Chart

            Note: ITW stock made great progress off its March 2009 low, surpassing the downtrend off its October 2007 high (red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (straight blue lines).  Intermediate term it is in an uptrend (purple lines).  Short term, it is in an uptrend (brown line).  The wiggly blue line is on balance volume.  The Dividend Growth Portfolio owns a full position---the result of a purchase, the stock rising into its Sell Half Range, one half of the stock being Sold and the stock rising back the value of a full position,  The upper boundary of its Buy Value Range is $36; the lower boundary of its Sell Half Range is $78.

http://finance.yahoo.com/q?s=ITW

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