Summary
- HON has announced an increase to the quarterly rate of its dividend in September in each of the last two years.
- Article forecasts a dividend increase to be announced later this month including an analysis on the payout trends.
- Our view on the future dividend growth potential.
Honeywell International Inc. (NYSE:HON), with a history going back to the 19th century, is a global diversified industrial giant with a market cap of $123 billion. The company operates across four segments including Aerospace, Building Technologies, Performance Materials, and Safety and Productivity Solutions. The stock has been a consistent winner over the past decade and up nearly 500% since 2009 on a total return basis. Investors may also be attracted to the company's established history as a dividend grower given it has increased the quarterly rate each year since 2011. This article looks at the company's payout and forecasts another dividend rate hike for later this month.
(Source: FinViz.com)
Honeywell Dividend History
Honeywell does not have a formal dividend policy but in its 2018 annual report mentioned that it intends to grow the dividend in line with earnings. Curiously, when announcing its 2017 dividend rate hike, the company mentioned that it "remains committed to growing the dividend faster than earnings for shareholders." In 2018, the statement was changed to say, "Honeywell remains committed to delivering value to shareowners through our aggressive capital deployment strategy." So, there is a bit of ambiguity but nevertheless we are confident that Honeywell will keep a pattern of dividend growth. As we discuss below, the payout is well supported by the company's balance sheet position while positive earnings growth expectations are also a favorable trend.
The rate hike has been above double-digits in percentage terms, averaging 12% over the past 8 years. Back in 2011, the company actually increased the quarterly rate twice, once in Q1 and again for the Q4 distribution. This year we are forecasting the next announcement on Friday, September 27, in line with the previous two years of a declaration on the last Friday of the month. It's unclear why the company moved up the announcement date to September starting in 2017 which had previously been in late October. One consideration is that a larger time frame between the announcement and record date allows more potential investors to purchase shares and become eligible for the payment.
The record date and payment date history have been more consistent in the middle of November and early December each, respectively. We note that the record date has been set on the third Friday of November while the payment date has been the first Friday of December since 2016. A trend in the industry is for investor relations and finance departments of these major corporations to have a more standardized and predictable distribution schedule. A large surprise on either the timing or amount of a dividend can add to stock price volatility which management typically looks to avoid. We forecast the record date to be set on Friday, November 15, 2019, with the payment to occur on Friday, December 6, 2019.
