Honeywell’s fourth-quarter dividend
In a press release on February 7, Honeywell (HON) announced the key dates for its first-quarter dividend. To be eligible for the dividend, investors must hold Honeywell stock as of February 22 in the company’s record. The dividend is slated to be paid to eligible shareholders on March 8.
Honeywell has declared a first-quarter dividend of $0.82 per share—an increase of 10% compared to the same quarter last year. However, there wasn’t a change in the company’s dividend rate on a sequential basis. 3M (MMM), Caterpillar (CAT), and Stanley Black & Decker (SWK) have declared or paid first-quarter dividends of $1.44, $0.86, and $0.66 per share, respectively.
At the end of the fourth quarter, Honeywell had 743.9 million common outstanding shares. If no buybacks are initiated by Honeywell before the record date, then the company would pay ~$610.0 million in dividends. In the past six years, Honeywell’s dividend rate has grown at a compound annual growth rate of 12.2%. We’ll see if Honeywell’s free cash flow can support this growth.
Free cash flow
In 2018, Honeywell generated a free cash flow of $5.6 billion. At the same time, Honeywell paid ~$1.66 billion in dividends, which implies that it has utilized ~38.3% of its free cash flow. In the past six years, Honeywell has used 38%–43% of its free cash flow to pay dividends. Honeywell’s free cash flow is strong enough to support its dividend growth.
Investors could get indirect exposure to Honeywell by investing in the Invesco Aerospace & Defense ETF (PPA), which invests 6.7% of its portfolio in Honeywell as of February 20.