TSI’s Scott Clayton has identified five top conglomerates. Each one has been selected for dividend sustainability and growth potential using our 12-point rating system to emphasize multi-year dividend growth, strong balance sheets, and consistent earnings.
Among TSI’s top picks are a North American holding company that anchors a broad portfolio of blue-chip financial and industrial assets, offering investors diversified exposure. There’s also an infrastructure powerhouse with significant stakes in utilities, logistics, and international operations – it’s uniquely positioned to capture both reliable cash flow and the potential upside from future asset spin-offs. We also found an innovation-focused manufacturer recognized for its continuous product development and proven ability to unlock shareholder value through strategic divestitures.
Plus, there’s a multinational conglomerate with a disciplined approach to optimizing its portfolio and enhancing returns by divesting non-core businesses at opportune moments; and a seasoned industry leader with a longstanding track record of successful restructurings, consistently finding new ways to maximize shareholder value through its expertise in orchestrating breakups.
Each company on our list boasts strong fundamentals: healthy balance sheets, disciplined management, and a long-standing commitment to rewarding shareholders. What sets them apart is their potential to close the “holding company discount”—giving investors not just income, but a real shot at capital appreciation as the market revalues these complex organizations.
TSI’s disciplined process means you get a portfolio built for both stability and opportunity—even when markets are unpredictable.
What are we looking for?
Sustainable dividends from conglomerates well placed to unlock holding company discounts.
The screen
Honeywell International Inc. moved up early this week after the industrial conglomerate reiterated plans to split into three independent companies.
The move, spurred by activist investor Elliott Investment Management, should further lift Honeywell’s share price and so shrink its “holding company discount.” That’s the tendency for multi-faceted conglomerates to trade for less than the total value of their various parts.
Holding companies often see their share prices rise after opting to break themselves up into their constituent businesses. Essentially, the market finds it easier to assess the value of “pure-play” firms.
We started with our extensive list of dividend-paying Canadian and U.S. companies, before singling out conglomerates offering steady growth prospects – as well as breakup potential. We then applied our TSI Dividend Sustainability Rating System to home in on 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 sufficient to cover dividend payments
- One point for 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.
5 conglomerate leaders picked for reliable income
Our TSI Dividend Sustainability Rating System generated five stocks:
Montreal-based Power Corporation of Canada (with a 4.7% yield) holds controlling interest in Great-West Lifeco Inc., IGM Financial Inc. and much more.
Calgary-headquartered ATCO Ltd. (3.9%) owns 52.5 per cent of Canadian Utilities Ltd. but also ATCO Structures & Logistics and 40 per cent of Neltume Ports; the latter operates 18 ports and related operations in South America.
Honeywell International Inc. (2.0%), based in North Carolina, had already spun off two subsidiaries (Resideo Technologies Inc. and Garrett Motion Inc.) to shareholders in 2018 and now plans to break up even further.
Global conglomerate 3M Co. (2.1%), with headquarters in Minnesota, sells a wide array of products with little overlap and so lot of breakup potential. In fact, it spun off its health care unit as Solventum Corp. last year.
Washington, D.C.-based Danaher Inc. (0.7%) has made a number of breakup moves in the past but still has a varied range of businesses well-positioned for hiving off as standalone firms.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
