There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

September 20, 2010 - Eaton Corp. (ETN-NYSE) operates as a power management company primarily in the United States, Canada, Latin America, Europe, and Asia Pacific. The company provides electrical components and systems for power quality, distribution, and control; hydraulics components, systems, and services for industrial and mobile equipment; aerospace fuel, hydraulics, and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy, and safety.

The company operates as a distributor and service provider of single phase and three-phase uninterruptible power supply systems. Eaton Corporation has a joint venture agreement with Nittan Global Tech Co. Ltd. to manage the design, manufacture, and supply of engine valves and valve actuation products to Japanese and Korean automobile and engine manufacturers; and a joint venture interest in SEG Middle East Power Solutions & Switchboard Manufacture LLC that manufactures low voltage switchboards and control panel assemblies for use in the power generation and industrial markets. The company was founded in 1916 and is headquartered in Cleveland, Ohio.

Eaton's stock dropped like a stone in 2008, going from $98.10 to a low of $30 in early 2009. The reason: earnings. They plummeted from $6.83 in 2008 to $2.59 as the recession took another bite out of one more company. But things are looking up, just as the stock is. Now it's trading at $82. Can it keep going?

Eleven analysts think this year's final number will be $5.06 a share, then they see $6.14 next year. For the current quarter, earnings estimate is for $1.36, well above the $1.21 of last year. In the fourth quarter, look for $1.36, only a penny ahead of last year's fourth.

During the second quarter, sales were up 16% from last year's second period. One division, Hydraulics, saw an increase of 34%, continuing a previous upward trend. Trucks also had better demand, especially the Class 8 truck (that's a truck with a gross vehicle weight rating of more than 33000 pounds; dump trucks and cement trucks are good examples). Another division, Electrical Americas, was hit with a 17% decline in late-cycle non-residential markets, but Trucks and Hydraulics more than compensated.

Management feels confident enough in its growth story that it recently raised the quarterly dividend by 16% to 58 cents a share or $2.32 a year, giving a yield of 2.80%. For the last 4 years, dividends were: $1.48, $1.72, $2.00 and $2.00. With a Financial Strength rating of A+, and the dividend taking 53% of earnings, it would seem to be secure. The last dividend payout was August 26 with an ex-dividend date of August 5.

More numbers: Trailing P/E is 17.70 while Forward P/E is 13.33. Price to sales ratio is 1.09. Price to book is 2.11. Book value is $39.15. Operating margin for the last 12 months was 9.18% while Profit margin was 6.21%. Return on equity was 11.88% and Return on assets was 4.51%. Total cash is $787 million or $4.69 a share. Total debt is $3.48 billion. Debt to equity is .53. Current ratio is 1.62. Total shares Outstanding are 167.80 million with a Float of 157.63 million. Insiders own .46% of the stock and Institutions have 82.40% of the Float.

Eaton is a solid stock, trading at its 52 week high. Investors like what management has done and anticipate more growth. If the global economy can show some strength, expect Eaton to benefit even more than analysts are currently predicting.

- Company Web site: www.eaton.com

Ted Allrich