HON Stock: Honeywell International Inc Is One Dividend Stock to Own Forever

HON StockHoneywell International Inc Is a Top Dividend Stock

With all of the stock market’s fears and greed, Honeywell International Inc. (NYSE:HON) stock is a dividend-paying standout that can bring a little more stability to your portfolio. This is a market for dividend-paying existing winners. It’s what institutional investors want in a slow-growth world with so much uncertainty.

Honeywell International Inc., out of Morris Plains, N.J., manufacturers a great deal of mechanical and electrical parts that are in virtually all commercial and military aircrafts. The company is also known for its environmental control and safety products, performance chemicals and materials, and technology products for automakers.

For the most part, the company’s businesses are operating at a growth rate that is above economy. This, combined with strong earnings growth and a long track record of increasing dividends to shareholders, makes Honeywell stock attractive in a risky market for stocks.

As a blue-chip, diversified multinational, Honeywell’s main operating risk (for investors) is currency translation. But the stock market knows this already and this position is still a winner because in essence, it is a cash flow story. This is what institutional investors are paying for.


The stock chart for HON stock is featured below:

Honeywell intl NYSE

Chart courtesy of www.StocCharts.com

What’s important about Honeywell’s financial performance is margin expansion, cash flow, dividends, and earnings growth.

The company has been a solid performer on these financial metrics in recent years. Last year (2015) just capped off Honeywell’s sixth consecutive year of double-digit earnings growth. All this from a very mature enterprise operating in a generally slow-growth environment.

In its fourth quarter of 2015, Honeywell’s total sales fell about three percent to $9.98 billion. But operating income margin grew a substantial 350 basis points to 18.8% over the same quarter of 2014 and reported earnings per share (ex-pension) improved 28.0% to $1.58.

Notably, Honeywell reaffirmed its 2016 full-year earnings-per–share (EPS) guidance for growth of between six percent and 10% over 2015. Margins are expected to improve once again this year.

The company’s current quarterly dividend payment is $0.595 per share and I expect management to give it another boost as it typically does in the fourth quarter of each calendar year.

In many ways, Honeywell’s financial performance is emblematic of this market’s top winners in the large-cap space. Currency translation means that top-line growth is non-existent. But EPS growth can almost be considered robust as big companies squeeze expenses on what are already strong balance sheets.

This is a slow-growth world and accordingly, dividend income is very important. This is even the case for more aggressive investors, who may not otherwise even be interested.

The Bottom Line on Honeywell Stock

Honeywell stock is not expensive considering its earnings growth and dividend prospects.

The Street has already voted on this position; this stock is trading right at its high while the broader market has stumbled this year.

Go-forward earnings estimates are going up for HON stock across the board. On many price retrenchments, this existing winner is worth looking at.

Investor expectations have come down tremendously this year. But what this means is that all big companies deliver the results on only one financial metric. In Honeywell’s case, margin expansion and EPS growth should be enough for this position to remain a winner and institutional favorite. The company’s dividends are just a bonus.