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Honeywell's (HON) Board Approves 10% Hike in Dividend Rate

Zacks Equity Research

Honeywell International Inc. HON, on Sep 27, announced that it is rewarding shareholders in the form of hike in the regular annual cash dividend rate.

Following the announcement, its share price increased 0.6% to eventually close at $168.04 on Friday.

Inside the Headlines

As communicated, Honeywell’s board of directors approved 10% or 32 cents per share hike in the annual dividend rate to $3.60 per share from $3.28. On a quarterly basis, the dividend increased to 90 cents from 82 cents per share. The company will commence paying the revised quarterly dividend of 90 cents from the fourth quarter (scheduled to be paid out on Dec 6, 2019) to shareholders on record as of Nov 15.

Notably, this hike marks the company’s 10th double digit increment in dividend rate since 2010. We believe that such shareholder-friendly policies of the company reflect a strong cash position.

Sound Shareholder-Friendly Policies

Honeywell firmly believes in rewarding shareholders handsomely through dividend payments and share buybacks. Notably, in the first two quarters of 2019, the company paid out dividends worth $1.2 billion and repurchased approximately shares worth $2.65 billion. It’s worth noting here that share repurchases made during the first and second quarter of 2019 boosted earnings by around 6 cents per share for both the quarters.

Existing Business Scenario

Honeywell expects strong demand for its warehouse automation, sensing and IoT businesses to boost revenues of the Safety and Productivity Solutions segment. Also, strength in process solutions business coupled with strong demand for equipment, absorbents and refining catalysts is likely to aid Performance Materials and Technology segment’s revenues. Further, strong demand for commercial fire and security products is expected to drive the Building Technologies segment.

However, softness in the company’s productivity products business due to inventory destocking, fewer large project rollouts in the mobility space and lower channel sell-through remains a concern.

In the past six months, the Zacks Rank #3 (Hold) company’s shares have gained 4% against the industry’s decline of 4.3%.

Key Picks

Some better-ranked stocks from the same space are Federal Signal Corporation FSS, Danaher Corporation DHR and United Technologies Corporation UTX. While Federal Signal sports a Zacks Rank #1 (Strong Buy), Danaher and United Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal surpassed estimates in each of the preceding four quarters, the average positive earnings surprise being 16.48%.

Danaher outpaced the consensus mark in each of the preceding four quarters, the average earnings beat being 3.25%.

United Technologies outpaced estimates in each of the preceding four quarters, the average positive earnings surprise being 13.19%.

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