1. What exactly are industrial stocks?
Industrial stocks refer to stocks for companies that construct infrastructure, manufacture heavy equipment, transport goods, or provide necessary functions such as waste disposal and defence. As such, industrial companies participate in the day-to-day activities associated with the economy, and many industrial companies will tend to experience sustained long-term growth.
2. Are industrial stocks considered appropriate for investing for the long-term?
Yes, many industrial stocks provide stable cash flow and regular dividend distributions, thus making them suitable for long-term investment. Industrial stocks tend to follow the economy’s general direction; however, solid industrial companies generally perform well after an economic downturn and reward investors who hold their stocks.
3. Why do investors find dividend-producing industrial stocks to be attractive?
Dividend-producing industrial companies are typically well-established with stable businesses and strong cash flows. Therefore, when they raise their dividends, as illustrated by the dividend increases from Waste Management and Lockheed Martin, these companies indicate that their businesses are sound and the dividends provide a source of income during times of market instability.
4. What types of risks should investors be aware of when it comes to industrial stocks?
In general, industrial stocks are most adversely affected during periods of slow economic activity. If construction, trade, or government spending decreases, there will likely be a decline in the demand for industrial products. Additionally, when companies have high levels of debt and increasing costs to procure raw materials, the company’s economics can suffer. Therefore, it is essential to understand a company’s financial fundamentals and make informed decisions about investing in industrial stocks.
5. Should investors consider investing in both US and Indian industrial stocks?
By having a mix of US and Indian industrial stocks, an individual will achieve better overall diversification across both countries. The US companies provide access to the global marketplace, with dividend-paying stock opportunities, whereas Indian companies are benefiting from the increasing growth of internal infrastructure, as well as rising levels of defence and ports.