Why Honeywell International is a Solid Long-Term Dividend Stock

Honeywell

While some companies are best suited to short-term investments, there are others that are great for investors interested in solid long-term dividend stocks. If you are more interested in the latter, there are several factors that you should take into consideration before making your investment. Elements of a company to consider are the industry, the company’s security, the payout history, the potential for growth, and whether financial experts believe that the company can support continued rises in dividend payouts in the coming years. It is important to fully understand a company’s performance in the past and the potential they have for the future before you make the decision to invest. According to many financial experts, one of the best companies to invest in right now is Honeywell International (NYSE:HON).

History

Honeywell International is a multinational conglomerate that produces both consumer and commercial products, aerospace systems, and engineering services. This fortune 500 company was founded in 1906, and the headquarters are in Morris Plains, New Jersey. The global workforce of this company now exceeds 130,000 people, of which approximately 58,000 are employed in the United States. This company is well known for its line of home thermostats. They also have many brands that consumers recognize, including Garrett turbochargers. Some of the products for which this company is best known include security alarm systems, dehumidifiers, air cleaners, home generators, air conditioners, fans, paper shredders, and sensors. Some of their products are made by other well-known manufacturers who have licensed the brand name.

The fact that this company has been in business for 113 years is something that works in its favor when it comes to investment potential. The company’s long history means that it is has a strong market position and it is considered one of the leaders in both the consumer and commercial electronics goods sectors. People trust this brand due to its history and size, and this means that Honeywell International can maintain a wide customer base, which supports sales and revenue. The diversity of the products and the global reach of this company are also beneficial features that make this company one that is worth considering for investment. Even if sales drop for one of their products, revenue is supported by sales from other products. Similarly, the geographical diversity of the company means that if there is an economic downfall that affects sales in one part of the world, the company will still have revenue from countries that are economically stronger.

Barron’s notes that Honeywell International’s yield from its product range is currently around 1.9 percent, which is just below that two percent average of the S&P 500. At first glance, this may not seem much of a yield. However, there is huge potential for growth as Honeywell is now focusing on evolving their business model and putting a greater focus on producing higher-margin software. In 2018, Honeywell International expanded its organic software revenue. Also, their cash flow was $5.6 billion, which is a significant increase from the $4.9 billion cash flow of 2017. If the company’s expansions go to plan, they should continue their current trajectory and increase its growth rate to 20 percent.

The deciding factor for many potential investors is the dividend payouts. This includes the company’s history of payouts and predictions for future payouts. According to Macrotrends, the dividend payouts were steady between 2000 and 2018. They then saw a significant increase which has now leveled. It is expected that the payout rate should remain steady in the coming years, which is another reason that this company is worth investment. The Motley Fool states that the different sectors of Honeywell International will perform differently in the coming years, and this is a point that needs considering when deciding whether to invest or not.

The Safety and Productivity Solutions Sector is predicted to perform consistently over the next few years, although guidance is somewhat conservative in relation to this sector. In the final quarter of 2018, this sector achieved 15 percent organic growth, which meant that organic growth for the year overall was 11 percent. If the economy holds up, then there is upside potential for this sector of the company. Furthermore, this sector is supported by strong growth from the warehouse automation operations. This should contribute to this sector seeing double-figure growth over the next two years. While some elements of the Performance Materials and Technologies sector struggled in 2018, Rockwell Automation was one element of the company that performed well, and they had a good final quarter in 2018. It is expected that they will maintain the guidance and growth expectations in relation to capital spending in heavy industries.

Final Thoughts

Another sector of the business that is expected to perform well is the Aerospace sector. Although this sector has high exposure to the cyclic business-jet market, Honeywell International’s CEO, Darius Adamczyk, has said that he feels confident about the outlook for the Aerospace sector in 2019 and beyond. This is in part thanks to the positioning of General Dynamics’ new Gulfstream G500 and Gulfstream G600 aircraft. Therefore, this sector is expected to achieve mid-single-digit growth from the commercial aftermarket in 2019.

Overall, most financial experts hold the view that Honeywell International is a sound investment in the long-term. Although there are some factors that may influence this company in the short-term, these are all things that will level out in the coming years. The positive aspects of this company that make it a worthwhile investment are its strong market position, its history of dividend payouts, and the diversity of the products. Other factors that contribute to this company’s success is its improved business model, its global operations, and the strong performance of the company in recent years. When all these factors are combined, it makes a strong case for Honeywell Internationals as a solid long-term dividend stock to consider adding to your portfolio.


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