Dividend Increase | Honeywell International (HON)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Honeywell for the dividend increase!
There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  

On September 27th the Board of Directors at Honeywell International (HON) approved an increase to the quarterly dividend payment.  The dividend was increased from $0.82 up to $0.90 per share.  That's an excellent solid 9.8% increase.  McDonald's is a Dividend Challenger with 9 consecutive years of dividend increases.  Shares currently yield 2.16% based on the new annualized payout.

The newly increased dividend will be payable on December 6th to shareholders of record as of November 15th.

Since I own 9.136 shares of Honeywell in my FI Portfolio, this raise increased my forward 12-month dividends by $2.92.  This is the 1st dividend increase I've received from Honeywell since initiating a position in January.  

A full screen version of this chart can be found here.

Honeywell hasn't decreased their dividend payment since 1993, I only have dividend data going back to then.  However, their dividend history does have some years that came and passed without a raise.  

Of the 26 1-year periods starting with 1994, Honeywell's dividend growth has ranged from 0.0%, bummer, to 20.4%.  The average of all those is 10.0%, which is really impressive considering there's 5 years without a raise, with a median of 10.7%.

Of the 17 rolling 10-year periods, Honeywell's annualized dividend growth has ranged from 4.9% to 10.8% with an average of 8.3% and a median of 8.4%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1993 can be found in the following chart.  

A full screen version of this chart can be found here.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 5 year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

A full screen version of this chart can be found here.

Honeywell's 5-year moving average forward dividend yield is 2.15%.  That's right around the current yield that shares are offering suggesting that Honeywell could be fairly valued right now.  

The fair value range based on dividend yield theory would be $152 - $186.

When examining various multiples to get a feel for Honeywell's valuation the valuation suggests it's in the fair value area.  Based on TTM data, the EV/EBIT ratio is 16.8x while the EV/EBITDA ratio is more attractive at 14.7x.  The EV/FCF ratio looks expensive at 23.4x.  

Using more commonly cited P/E multiples, Honeywell looks to be in the fair value range.  Analysts expect Honeywell to have $8.10 EPS for the current year and $8.86 for FY 2020.  That puts the P/E multiples at 20.6x and 18.9x, respectively.

Wrap Up

This raise increased my forward dividends by $2.92 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.97% this raise is like I invested an extra $98 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way.  

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

Thus far in 2019 I've received 40 raises from 35 of the 54 companies in my FI Portfolio.  Combined the dividend increases have boosted my forward 12-month dividends by $288.23.

My FI Portfolio's forward-12 month dividends climbed to $7,481.47.  Including my FolioFirst portfolio's forward dividends of $100.01 brings my total taxable accounts dividends to $7,581.48.  My Roth IRA's forward 12-month dividends increased to $617.26.  My Rollover IRA's forward dividends remain at $2,231.14.  Across all accounts I can expect to receive $10,429.88 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Honeywell's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Honeywell?  Do you think the dividend growth was just right or too much?

Please share your thoughts below.


  1. It's a more than solid increase by HON in my eyes. I've made a list of industrials that I want to own in my portfolio. HON is very high on that list. Great company IMO.

    1. SF,

      HON's raise was fantastic at 9.8%. I'd have been happy with a 5-6% raise, but nearly 10% works as well. HON is one of the big industrials that I really want to build my exposure up too. Unfortunately, right when I started investing the share price popped pretty good. It's pulled back some now so it might be about time to start re-valuing the business again. All the best.


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