Honeywell Raises Dividend 5% After Stronger-Than-Expected Q2

Tech and industrial group Honeywell International  (HON) - Get Honeywell International Inc. Report said Friday that it’s raising its annual dividend 5% to $3.92 a share from $3.72.

The increase starts with a fourth-quarter dividend of 98 cents a share, payable Dec. 3 to holders of record Nov. 12. 

The previous quarterly dividend was 93 cents a share. Last year, Honeywell lifted its dividend 3% amid the pandemic.

Honeywell recently posted stronger-than-expected earnings for the second quarter, while boosting its full-year profit outlook. Rising sales for its aerospace division helped as airlines are beginning to recover traffic that was hard hit during the worst of the pandemic-forced shutdowns. 

The company's warehouse automation business surged during the pandemic as more and more retailing moved online.

Honeywell shares at last check rose 1.7% to $215.91. The stock touched a 52-week high near $237 in early August.

Dividend increases are generally seen as a sign of strong corporate performance, indicating a company has surplus cash to return to shareholders.

Morningstar analyst Joshua Aguilar puts fair value for Honeywell at $211.

“Honeywell is one of the strongest multi-industry firms in operation today, which we think the market rightly recognizes by awarding the firm a conglomerate premium,” he wrote in a July commentary.

“We predicate our thesis mostly on:
a) the commercial aerospace recovery;
b) continued strength in defense; and
c) an increasingly automated world in mission critical end-markets like warehousing, utilities, oil and gas.

He offered these forecasts: “From a 2019 base year, we think Honeywell is capable of:

· mid-single-digit top-line growth,

· incremental operating margin growth of just over 30%,

· high-single-digit adjusted earnings per share growth, and

· free cash flow conversion safely over 100%, which represents about a 5% increase on average from its legacy conversion rates.”