Diversified conglomerate Honeywell International Inc. (HON) recently announced a 15% year-over-year hike in its quarterly dividend payout to 51.75 cents per share or $2.07 on an annualized basis. The increased dividend will be payable from fourth-quarter 2014, and is scheduled to be paid on Dec 10 to shareholders of record as of Nov 20.
Based on the closing price of $96.12 on Oct 31, 2014, the proposed dividend affirms a yield of 2.15%. A steady dividend payout is part of the long-term strategy of Honeywell to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of Honeywell’s strong points. The current dividend increase is the 10th such instance for the company since 2005.
The dividend increase comes close on the heels of strong third-quarter 2014 results, wherein Honeywell reported substantial year-over-year improvements in revenue and recurring earnings on the back of continued operational momentum. Revenues improved 5.0% year over year to $10,108 million. Non-GAAP earnings (at 26.5% tax rate) in the reported quarter were $1.43 per share compared with $1.25 in the year-ago quarter and beat the Zacks Consensus Estimate by a couple of cents.
Honeywell also has a solid liquidity position. The company generated $1,233 million in cash from operations in the reported quarter compared with $1,070 million in the prior-year period. Free cash flow stood at $974 million as of Sep 30, 2014, compared with $867 million in the year-ago period. The balanced capital allocation strategy, including strategic M&A, opportunistic share buybacks and healthy dividends give us enough confidence to remain bullish on the stock.
Going forward, Honeywell expects to deliver strong earnings growth in the forthcoming quarters by continuing to invest in new products and technologies, and increase its footprint in high-growth markets.
Honeywell currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include CLARCOR Inc (CLC), Compass Diversified Holdings (CODI) and Noble Group Ltd. (NOBGY), each carrying a Zacks Rank #2 (Buy).
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