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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Honeywell International Inc. (NYSE:HON) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 15th of August in order to receive the dividend, which the company will pay on the 6th of September.
Honeywell International's next dividend payment will be US$0.82 per share. Last year, in total, the company distributed US$3.28 to shareholders. Last year's total dividend payments show that Honeywell International has a trailing yield of 2.0% on the current share price of $166.67. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Honeywell International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Honeywell International paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Honeywell International generated enough free cash flow to afford its dividend. Fortunately, it paid out only 43% of its free cash flow in the past year.
It's positive to see that Honeywell International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Honeywell International's earnings per share have been growing at 14% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Honeywell International has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.