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We just covered the 14 Best Defensive Stocks to Invest In Now and Illinois Tool Works Inc. (NYSE:ITW) ranks 6th on this list.

The primary defensive moat for Illinois Tool Works Inc. (NYSE:ITW) is its proprietary 80/20 Front-to-Back Process. The company focuses its resources on the 20% of its customers and products that generate 80% of its revenue. By ruthlessly eliminating complexity and low-margin tail products, it maintains some of the highest operating margins in the industrial sector, 26.5%–27.5% as of early 2026. The firm is composed of hundreds of small, autonomous businesses across seven segments, like Automotive, Food Equipment, and Welding, etc. This decentralization allows individual units to pivot quickly during localized economic shifts, preventing a single weak sector from dragging down the entire corporation.

Stocks

Illinois Tool Works Inc. (NYSE:ITW) is a buy-and-hold staple for income-focused investors. Earlier this year, the board declared a $1.61 per share quarterly dividend, which was paid out in early April. This equates to an annualized payout of $6.44. The company has increased its dividend for over 50 consecutive years. In late 2025, it raised the payout by 7%, signaling strong confidence in its 2026 cash flow despite global geopolitical headwinds. Defensive stocks are valued for their ability to generate cash when times are tough. For the trailing twelve months ending March 2026, ITW generated $2.69 billion in Free Cash Flow. Analysts project FCF to grow steadily, reaching an estimated $4.26 billion by 2030.

While we acknowledge the potential of ITW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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