Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Honeywell International Inc. In Focus
Based in Charlotte, Honeywell International Inc. (HON) is in the Conglomerates sector, and so far this year, shares have seen a price change of -7.62%. The company is currently shelling out a dividend of $1.03 per share, with a dividend yield of 2.08%. This compares to the Diversified Operations industry's yield of 0.16% and the S&P 500's yield of 1.76%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.12 is up 3.8% from last year. In the past five-year period, Honeywell International Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.44%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Honeywell International Inc.'s payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HON expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $9.12 per share, representing a year-over-year earnings growth rate of 4.11%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that HON is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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