Honeywell’s second-quarter dividend
In a press release on April 29, Honeywell (HON) announced the key dates for its second-quarter dividend. To be eligible for the dividend, investors must hold Honeywell stock as of May 24 in the company’s record. The dividend is expected to be paid to eligible shareholders on June 14.
Honeywell 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. Honeywell’s industrial peers Stanley Black & Decker (SWK), Textron (TXT), and United Technologies (UTX) have declared a second-quarter dividend of $0.66, $0.02, and $0.735, respectively.
At the end of the first quarter, Honeywell had 738.8 million outstanding shares. Assuming that Honeywell doesn’t buy back any shares until the record date, it will be spending ~$605.8 million on dividend payments. Accounting for 2019 with the current dividend rate, Honeywell’s dividend rate since 2012 has grown at a compound annual growth rate of ~11.5%. Can Honeywell’s free cash flow support the dividend growth?
Free cash flow
In the first quarter, Honeywell generated a free cash flow of $993 million. The company is expected to generate a free cash flow of $5.2 billion–$5.7 billion for 2019. 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 7.2% of its portfolio in Honeywell as of May 23.