1 Ultra-Safe Dividend King Stock to Double Up On in June

Illinois Tool Works (NYSE: ITW) -- often referred to simply as ITW -- is an industrial conglomerate and Dividend King that has boosted its payout for 61 consecutive years. However, ITW's stock price and earnings have stagnated as the company faces a challenging operating environment.

Despite these conditions, ITW continues to chart a path toward long-term growth and set clear shareholder expectations.

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Here's why ITW stands out as a top Dividend King to buy in June.

Image source: Getty Images.

ITW sets goals that reward shareholders

A good management team will set clear standards that investors can use to determine if the company is executing on its goals. A blend of short-term, medium-term, and long-term targets can help build an investment thesis and determine if those targets are good enough to buy and hold a stock.

ITW is an excellent example of a company that set ambitious goals, achieved them, and rewarded its shareholders over an extended time period. From 2012 to 2023, ITW deployed its Enterprise Strategy, which boosted its operating margin by over 9 percentage points, more than tripled its earnings per share (EPS) and market cap, and increased its dividend by 3.7 times.

From 2024 to 2030, ITW is focusing on organic growth, led by its Customer-Back Innovation process. The process involves acting on customer ideas and responding to customer needs rather than coming up with ideas and hoping they stick. The idea is to leverage ITW's existing brands and take those brands to the next level through product development and global sales rather than overly relying on mergers and acquisitions.

The strategy aligns with ITW's structure. Although ITW is a conglomerate with dozens of brands and seven key segments -- automotive original equipment manufacturing, construction products, food equipment, polymers and fluids, specialty products, test and measurement and electronics, and welding -- it gives a lot of flexibility to each segment. This autonomy allows each segment to adapt to changing demand trends, pricing, and economic conditions.

By 2030, ITW expects its operating margin to reach 30% and achieve average annual EPS growth of 9% to 10%, which will support a 7% annual increase in its dividend. It also plans to convert 100% of net income into free cash flow, which will support a growing dividend, buybacks, and organic investments. It's a bold strategy, but ITW's results showed that it was possible as the company steadily grew its operating margin.

But the recent quarter saw a decline in operating margins and sales. In the first quarter of 2025, revenue fell 3.4%, organic growth was down 1.6%, and operating margin was just 24.8% compared to 25.4% in the first quarter of 2024 (after accounting for a one-time inventory accounting change). Generally accepted accounting principles (GAAP) EPS in the quarter was down a mere 2.5% after factoring in the accounting change.

Overall, the quarter wasn't bad given customer uncertainty amid tariff pressures. And better yet, ITW maintained its full-year 2025 guidance for $10.15 to $10.55 in GAAP EPS and organic growth of 1% to 3%.

Reliable passive income at a good value

ITW has hit a speed bump on the road toward its 2030 goals, but that doesn't mean the stock isn't a good buy now. One of the most compelling reasons to own ITW is the company's steady dividend growth and dividend affordability.

ITW EPS Diluted (TTM) data by YCharts

As you can see in the chart, ITW has steadily grown its EPS and FCF per share -- which has supported a growing dividend and considerable buybacks that have drastically reduced ITW's share count -- thereby accelerating EPS growth.

In addition to being a reliable dividend stock, ITW is also a good value. Based on the midpoint of ITW's 2025 guidance -- $10.35 in EPS -- and the stock price at the time of this writing of around $245 per share, the company would have a price-to-earnings ratio of 23.7, which isn't dirt cheap, but it is reasonable for a high-quality business that is extremely well run.

A high-conviction buy this summer

ITW checks all the boxes of a safe stock to double up on in June. There was more tariff uncertainty when ITW reported its first-quarter earnings in late April. And yet, the company's earnings didn't take too much of a hit, and it reaffirmed full-year guidance -- showcasing ITW's confidence in its ability to navigate tariffs.

ITW generates plenty of earnings and cash flow to cover its dividend payment and still has plenty of dry powder left over to buy back stock. ITW's valuation is reasonable, and its 2.5% yield is solid.

ITW is the kind of business investors can build a passive income portfolio around, making it a good buy now.

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