Ingersoll-Rand

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2012 has been a stellar year for shareholders at Ingersoll-Rand ( IR): Shares of the $12 billion industrial name have rallied more than 25% since the first trading day of January. And those returns are piled onto thanks to a 16-cent quarterly dividend payout that puts IR's yield at a modest 1.6%.

While this firm's yield doesn't qualify it as a core income holding, industrial investors shouldn't ignore the momentum that IR is enjoying right now -- or the potential for that yield to rise thanks to dividend hikes.

Ingersoll-Rand manufactures a large number of well-known brands, ranging from Club Car golf carts to Schlage locks to Trane air conditioners. Like other industrial names, the aftermarket is big business for IR. The firm only generates around a quarter of sales from new equipment; the rest of its business comes from replacements and parts, operations that have substantially lower costs since customer acquisition is effectively free.

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Hefty construction exposure heading into the recession of 2008 was an eye opener for management (as was the case at many industrials), and IR exited the crisis in much better financial shape than it entered it in. Cash flows have been strong in the last few years, and a relatively trim balance sheet leaves plenty of room for another dividend hike in 2012.

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