The Company in a Nutshell
- ITW continuously invests in new products and holds over 17,000 granted and pending patents. The company is a Dividend King with over 50 years of consecutive dividend increases. ITW focuses on an 80/20 management method, enabling it to scope out great business opportunities.
| Date Reviewed | 02/07/2026 |
| Company Name | Illinois Tool Works Inc |
| Symbol | ITW |
| Sector | Industrials |
| Industry | Specialty Industrial Machinery |
| Beta | 1.15 |
| PRO Rating | 4 |
| Dividend Safety | 4 |
Business Model
Illinois Tool Works Inc. is a global manufacturer of a diversified range of industrial products and equipment. The Company's segments include Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products, and Specialty Products. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Food Equipment segment produces warewashing equipment, cooking equipment, refrigeration equipment, food processing equipment, ventilation and pollution control systems, and others. Its Welding segment produces arc welding equipment and metal arc welding consumables and related accessories. The Construction segment is a supplier of engineered fastening systems and solutions. The Specialty Products segment includes conveyor systems and line automation for the food and beverage industries; plastic consumables such as multipack cans and bottles and related equipment; components for medical devices, and others.
| Current price | 260.55 |
| ROE | 93.75 % |
| ROIC | 32.60 % |
| Shareholder Yield | 0.05 % |
| 5-Yr Total Return | 32.15 % |
| 1-Yr Total Return | 7.30 % |
| Next Earnings Date | 04-28-26 |
Latest Quarter Information
What the CEO said:
ITW delivered a solid finish to the year, marked by more than four percent revenue growth and a seven percent increase in GAAP earnings per share. As a result of our disciplined execution across all seven segments, we expanded both operating margin and income to record levels in the quarter. Our results over the past year demonstrate that ITW is well-positioned to deliver solid financial performance in any environment as we consistently exceeded market growth while improving profitability and margins. Notably, our Customer-Back Innovation initiatives were a primary catalyst, contributing 2.4 percent to revenue growth in 2025.
2026-02-07, ITW gave good results for 4Q'25. Organic growth was 1.3%; FX and acquisitions contributed 2.5% and 0.3%, respectively. Segment revenue was led by Automotive OEM at $827M, Test & Measurement & Electronics at $789M, Food Equipment at $698M, then Welding $462M, Polymers & Fluids $457M, Construction Products $431M, and Specialty Products $433M. Q4 operating margin was 26.5% (+30 bps) and segment operating margin was 27.7% (+120 bps). ITW repurchased $375M of shares in Q4 and returned $3.3B to shareholders in FY25. Q4 FCF was $858M. For 2026, ITW guided to revenue growth of 2%-4% and operating margin of 26.5%-27.5%. CBI contributed 2.4% to revenue growth in FY25.
Investment Thesis
If an investor is looking for a stable and well-diversified industrial stock, ITW may be a great candidate. The company covers 7 different segments with similar sales volumes and margins. This means that no matter which sector is down, ITW will have growing sectors among its divisions. ITW has built a strong entrepreneurial culture within its business, where most divisions are encouraged to shoulder initiatives as long as they follow set protocols. ITW has been able to improve its margins over time by focusing on its most important customers and simplifying product lines; initiatives such as these will prove fruitful over time. We believe that ITW has some room to grow, as the automotive OEM segment should be supported by improvements in the semiconductor supply chain. ITW’s dividend triangle remains strong even if there is a slowdown due to the overall economic environment. 2025 closed with strong Q4 margins and EPS growth, and 2026 guidance points to more organic growth and another step-up in profitability.
Playbook: ITW runs seven segments: Automotive OEM, Food Equipment, Test & Measurement and Electronics, Welding, Polymers & Fluids, Construction Products, and Specialty Products. The corporate edge is process, not projects—80/20, sourcing, and local accountability drive high ROIC across thousands of SKUs serving fragmented end-markets.
Growth Vectors: Incremental share gains via customer-back innovation, selective bolt-ons, and ongoing portfolio discipline fuel durable growth. Automotive content expansion, commercial kitchen upgrades, electronics test, and welding consumables are steady lanes; enterprise initiatives continue to expand margin. Management targets above-market organic growth via customer-back projects, while enterprise initiatives add roughly 100 bps of margin in 2026 guidance.
Economic Moat: Process discipline is the moat. The ITW Business Model institutionalizes pricing power, mix improvement, and complexity reduction, delivering structurally higher margins and returns versus typical industrial peers. High switching costs on proprietary consumables and application-specific parts reinforce stickiness across dispersed customer bases. Management’s “Next Phase 2024–2030” targets keeping organic growth on par with its world-class profitability.
Dividend Triangle
| 5-Yr Rev. Growth | 4.45 % |
| 5-Yr EPS Growth | 8.55 % |
| 5-Yr Div Growth | 7.10 % |
Potential Risks
The market is concerned about the lack of revenue growth over the past 10 years. Although the situation has improved as of late, the company is not out of the woods yet. ITW posted a ~0.9% revenue growth in 2025. The company has had difficulty posting robust organic growth, with it being at only about 1-2% over the past decade, and it remains dependent on its acquisitions to generate further growth. As we move toward a potential recession, this problem may resurface this year. The biggest problem here is the lack of growth vectors. ITW is a resilient business, but sales will follow industrial cycles.
Business Vulnerabilities: Cyclical end-markets and global footprint bring demand, FX, and pricing volatility.
Industry & Market Threats: Trade policy is a swing factor. A mid-2025 downgrade cited tariff risk and valuation sensitivity if growth cools. Slower capex or auto build rates would pressure Automotive OEM and other cyclical pockets.
Competitive Landscape: ITW competes against focused specialists and large multi-industrials across each niche. Closest multi-industrial comps are 3M, Dover, Emerson, Fortive, Honeywell, Parker-Hannifin, Roper, Eaton, and Rockwell Automation.
Dividend Growth Perspective
The company's payout has increased by 40% over the past 5 years and has over 50 years of dividend growth history, which is impressive, but an investor shouldn’t expect such growth rates going forward. Both payouts are under control, and management seems to be committed to sharing the wealth with shareholders. However, one can see ITW only increasing its payouts by a high single-digit rate for several years. In August of 2023, the company announced another generous increase of 6.9% (from $1.31/share to $1.40/share). This year, ITW offered another 7% increase and raised the dividend to $1.61/share.
| Dividend ($) | 6.44 |
| Dividend Yield Fwd | 2.45 % |
| Dividend Frequency | Quarterly |
| Average 5-Yr Yield | 2.35 % |
| Payout Ratio (%) | 59.00 |
| Cash Payout Ratio (%) | 65.95 |
| DGR 1-Yr (TTM) | 7.30 |
| DGR 3-Yr (TTM) | 7.10 |
| DGR 5-Yr (TTM) | 7.10 |
| DGR Streak | 60 |
| Chowder Score | 9.60 |
| Next DVD PMT | 04-09-26 |
Valuation
| Recent Annual Dividend Payment | $ 6.44 |
| Expected Dividend Growth Rate Years 1-10 | 7.00% |
| Expected Terminal Dividend Growth Rate | 6.00% |
| Discount Rate | 9.00% |
| Discount Rate (Horizontal) | |||
| Margin of Safety | 8.00% | 9.00% | 10.00% |
| 20% Premium | $ 446.65 | $ 296.79 | $ 221.91 |
| 10% Premium | $ 409.43 | $ 272.06 | $ 203.41 |
| Intrinsic Value | $ 372.21 | $ 247.32 | $ 184.92 |
| 10% Discount | $ 334.99 | $ 222.59 | $ 166.43 |
| 20% Discount | $ 297.77 | $ 197.86 | $ 147.94 |
| Market Cap | 75 B |
| PE Ratio | 24.85 |
| Fwd PE | 22.70 |
| Price to Book Ratio | 23.30 |
| DDM Valuation | 247.32 |
| Average 5-Yr PE | 24.92 |
| Value Score | 29 |