What are we looking for?
Supply chain robotics stocks with bright futures – and sustainable dividends.
The screen
There’s no question that businesses in general face a lot of challenges in this new year, with the availability and cost of labour prominent among them.
But meanwhile, manufacturing and warehousing, two key supply chain components, are already among the biggest users of labour-saving robots. And thanks to continuing advances in artificial intelligence, the complexity of tasks that robots can perform keeps expanding rapidly.
How soon supply and demand for labour will stabilize is unclear. But what is certain is that the shift to greater use of robotics is poised to accelerate even faster – and robotics firms serving manufacturing and warehousing offer some of the best opportunities for investors.
Our search started with leading firms in robotics. We then singled out those with the best prospects and sustainable dividends. We then applied our TSI Dividend Sustainability Rating System to home in on the top dividend payers. Our system awards points to a stock based on key factors:
- One point for five years of continuous dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company is an industry leader.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated seven stocks: Rockwell Automation Inc., headquartered in Milwaukee, Wis., is a top global provider of industrial robotics for manufacturers. Swedish/Swiss multinational ABB Ltd. is a leader in robotics and machine automation.
Three Japan-based firms are global leaders in robotics: Fanuc Ltd. is a big supplier of automation for manufacturing; Yaskawa Electric Corp. makes heavy-duty industrial robots; and Daifuku Co. Ltd. specializes in automated material handling systems.
Teradyne Inc., based in North Reading, Mass., continues to successfully expand beyond test equipment for computer chips into industrial robots. And finally, Cognex Corp., also in the Greater Boston area, is a maker of machine vision systems, software and sensors used in robotic manufacturing.
Note: The very low yields of some robotic stocks, such as Teradyne, Cognex and others, are mostly due to their impressive share-price gains.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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