Illinois Tool Works in 5 Years: Boom, Bust, or Quietly Crushing It?

Most investors have probably heard of Illinois Tool Works (NYSE: ITW). But most of those same investors would also likely struggle to name a single product it manufactures (other than "tools"). That's because it doesn't really specialize in anything. Rather, it makes a little of almost everything, ranging from automotive air bags to restaurant refrigerators to welding equipment to plastic bags to construction fasteners, and more. In an environment where specialization is the norm, ITW has taken a different tack.

The thing is, it works. While it's never been a high-growth company, with the exception of the period when the COVID-19 pandemic stifled the domestic and global economies, Illinois Tool Works has been a reasonably reliable revenue grower.

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It's also been a pretty consistent profit producer. Last year's revenue of $16 billion and per-share earnings of $10.49 -- en route to the company's 2026 top-line guidance of around $16.5 billion and a profit of between $11.00 and $11.40 per share -- is pretty typical for this $80 billion outfit.

More net gains than you might expect

But you need more than slow single-digit growth? Don't dismiss the power of slow and steady progress. Even if dividends aren't your thing, Illinois Tool Works' quarterly per-share payout has grown from $0.55 a decade ago to $1.61 now. That's annualized growth of a little more than 11%, which is more than the broad market's average annual gain. Reinvesting these dividend payments in more shares of ITW, which has been helped by consistent stock repurchases, would have kept up with the S&P 500's net returns during this stretch, and done so with much less risk.

Data by YCharts.

And that's based on a dividend, by the way, that's now been raised for 62 consecutive years. There's nothing on the near-term or long-range radar that suggests the underlying progress will be disrupted in the foreseeable future, either. Illinois Tool Works' product lines may be boring. But, they're perpetually necessary.

One of the stock market's best-kept secrets

In answer to the question of where ITW stock will be three, five, or even 10 years into the future, it's certainly not going to be a bust. It's probably not going to be a booming winner either, to be fair. Rather, it's likely to remain the quiet, often-overlooked winner it is today -- the sort of unassuming stock that unexpectedly turns patient investors into millionaires while they weren't even looking. The stock's March pullback from its February surge is not only an opportunity, but nothing particularly unusual for this ticker that's in the habit of taking one step back for every two steps forward it makes.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Illinois Tool Works. The Motley Fool has a disclosure policy.