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Illinois Tool Works (ITW) Stock Analysis
Illinois Tool Works Dividend
Sector: Industrials Industry: Specialty Industrial Machinery
The Illinois Tool Works (ITW) dividend has been paid every year since 1933 and increased for 61 consecutive years; qualifying the company as a Dividend KIng, Dividend Aristocrat and Dividend Champion.
ITW is a niche player with some products and services providing a small moat and others not contributing. Cost advantages due to scale and the cost of customers switching provide some protection.
Current Dividend Per Share Annualized: $6.00
Illinois Tool Works (ITW) Intrinsic Value – Margin of Safety Analysis
(updated March 2025)
Normalized Diluted Earnings Per Share (TTM): $11.71
Free Cash Flow Per Share (TTM): $9.55
Cash Flow From Operations Per Share (TTM): $11.02
Estimated Intrinsic Value: $160
Target Buy Price Based on Required Margin of Safety = $160
(Required Margin of Safety Based On Risk Stability Grade:
A = 0%, B = 20%, C = 40%, D = 60%, F = 80%)
Target SELL Price Based on Estimated Intrinsic Value = $224
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 40%, B = 25%, C = 15%, D = 5%, F = 0%)
Risk / Stability Grade: A
A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.
B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.
C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.
D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.
F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.
Financial Risk Grade: A
A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.
B grade indicates a very low probability for a dividend cut.
C grade indicates a low probability for a dividend cut and/or average safety risk.
D grade indicates there are issues that should be considered concerning future dividend payments.
F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.
Business Quality Grade: A
A grade indicates earnings quality is high or far above average.
B grade indicates earnings quality is good and/or above average.
C grade indicates earnings quality is acceptable or average.
D grade indicates earnings quality is poor and requires thoughtful due diligence.
F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.
Earnings Report: 12/31/24
AAAMP Portfolios Position Disclosures:
Treasure Trove Dividend (TTD) – None
Global Dividend Value (GDV) – None
Dividend Growth & Income (DGI) – None
Global Value (GV) – None
Global Value Aggressive (GVA) – None
Global Conservative Income (GCI) – None
Global High Income (GHI) – None
Description
Sector: Industrials
Industry: Specialty Industrial Machinery
Company Overview:
Illinois Tool Works (ITW) is a diversified industrial manufacturer that produces engineered fasteners, components, equipment, and consumable systems. With operations in nearly 55 countries, ITW serves industries such as automotive, construction, food equipment, packaging, and specialty products. The company is known for its decentralized business model, which allows its divisions to operate with significant autonomy while maintaining a strong focus on innovation and customer-driven solutions.
Company Strengths:
ITW’s key strengths lie in its strong portfolio of highly profitable businesses, its consistent dividend growth, and its ability to generate solid cash flow. The company’s “80/20 business model” prioritizes high-margin products and efficiency, allowing it to maintain industry-leading operating margins. Additionally, ITW’s diversified end markets provide resilience against economic downturns, and its long history of returning capital to shareholders through dividends and buybacks makes it an attractive investment.
Company Challenges:
Despite its strengths, ITW faces challenges such as cyclical demand in industries like automotive and construction, which can impact revenue during economic slowdowns. The company also contends with supply chain disruptions and inflationary pressures that affect raw material costs. Additionally, as a global business, ITW must navigate currency fluctuations and geopolitical risks that can impact international operations and profitability.
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Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.