These 2 Growing Dividends Are On Sale This Summer

The article argues for a “buy in July” setup, citing S&P 500 gains of +2.3% on average over the 20 years to July 2024 and a post-midterm tailwind averaging +14% for the S&P 500. For dividend-growth ideas, it highlights ITW’s Q1 results (revenue +5%, EPS +12%, operating margin +60 bps to 25.4%) and a guidance raise (+$0.10 to $11.10–$11.50), alongside a 2.4% current yield and a much higher yield for long-term buyers plus significant buybacks (management repurchased ~17% of float over the decade). It also flags Deere’s construction-equipment strength (management forecasting +20% sales and +10% to +12% operating-margin expansion in 2026) despite agricultural softness (ag sales -14% in Q1), tempered by expectations of lower fuel/inflation costs and a manageable payout ratio (dividend ~47% of trailing 12-month free cash flow).

Analysis

The better read-through is not “summer strength,” it’s that lower inflation/rates would mechanically support long-duration dividend growers with visible capital return, while weakening the appeal of lower-quality cyclical industrials. ITW is the cleaner expression: high margins, steady buybacks, and a low-beta earnings stream can rerate if Treasury yields drift lower over the next 1-3 months; if rates back up, the valuation case stalls quickly. The analyst skepticism matters because incremental good news can still trigger estimate revisions, but the stock likely needs confirmation through another quarter of margin durability rather than seasonality alone.

DE is more of a two-stage trade. Near term, the construction mix can offset ag softness, but the stock’s upside is more dependent on whether farm economics actually stabilize in the next 1-2 quarters; otherwise the market will continue to discount the ag drag and defer multiple expansion. A true catalyst would be commodity firmness plus evidence that replacement demand is improving, while the main falsifier is another leg down in farm equipment orders or a delay in the expected margin lift. CAT is the natural competitor comparison: if infrastructure/digital build stays firm, DE’s construction exposure should outgrow the ag headwind.

The contrarian point is that the article leans too hard on calendar effects. The tradable signal is not July; it’s quality balance sheets and capital return in a disinflationary setup. If oil and input costs keep easing, the real winner may be not the highest-yield names, but the firms with room to compound dividends and buybacks without stretching payout ratios.

Key Decisions for Investors

• Long ITW on pullbacks over the next 1-4 weeks; target a 6-12 month hold if forward margins stay near 25% and management keeps raising guidance. Falsifier: margin compression or no follow-through in the next earnings print.
• Pair trade: long ITW / short XLI as a cleaner idiosyncratic quality-vs-beta expression for the next 1-3 months. Risk/reward improves if rates drift lower; trim if industrial cyclicals outperform on a sharp growth surprise.
• Conditional long DE only after confirmation that farm-equipment orders and grain prices stabilize for at least one quarter. Time horizon 3-9 months; falsifier is continued weakness in large-farm sales or no improvement in dealer inventories.
• Relative-value pair: long DE / short AGCO if you want to express a U.S. equipment leader with better construction offset and capital-return support. Best entry is after any ag-sector selloff, not after a commodity spike.
• Watchlist, not a trade: if the 10Y yield reverses higher, reduce exposure to both names because the multiple expansion case is more sensitive to rates than to seasonality.