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 25th the Board of Directors at Honeywell International (HON) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.90 up to $0.93.  That's an okay 3.3% raise.  Honeywell is a Dividend Contender with 10 consecutive years of dividend growth. Shares currently yield 2.30% based on the new annualized payout.

The new dividend will be payable December 4th to shareholders of record as of November 13th.  

Since I own 10.358 shares of Honeywell in my FI Portfolio, this raise increased my forward 12-month dividends by $1.24.  This is the 2nd dividend increase I've received from Honeywell since initiating a position in January 2019.  Total organic dividend growth over that time is a solid 13%.  

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

While Honeywell's streak is just 10 years long, they do have a pretty strong history of dividend growth.  Dating back to at least 1993, Honeywell has paid the same or higher dividend every single year.  It's not quite as impressive as an uninterrupted growth streak, but it's still pretty solid.

Of the 27 periods dating back to 1993, year over year dividend growth has ranged from 0% to 20% with an average of 10% and a median of 10%.

Of the 23 rolling 5-year periods over that time, annualized dividend growth has range from 1.9% to 16.0% with an average of 9.4% and a median of 9.1%.

Of the 18 rolling 10-year periods annualized dividend growth has ranged from 4.9% to 11.6% with an average of 11.6% and a median of 8.6%.

Considering the 5- and 10-year periods include the 4 year stretch from 2001 through 2004 with no dividend growth that's pretty impressive.

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 average forward dividend yield is 2.18% which corresponds to a share price of $170 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 5-year moving average yield +/- 10%.  That gives a fair value range of $155 - $189 and suggests that Honeywell is trading on the lower end of fair value at current prices.  

Wrap Up

This raise increased my forward dividends by $1.24 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.80% this raise is like I invested an extra $44 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.

I've now received 33 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $235.00.

My FI Portfolio's forward-12 month dividends are $7,400.48  Including my FolioFirst portfolio's forward dividends of $104.43 brings my total taxable accounts dividends to $7,504.91.  My Roth IRA's forward 12-month dividends are $661.60.  My Rollover IRA's forward dividends are $3,011.78.  Across all accounts I can expect to receive $11,178.29 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 a return to the high single digit annual dividend growth can be expected soon?

Please share your thoughts below.