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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Honeywell International Inc. (HON)

Company Information:

Founded in 1906 by Mark C. Honeywell and headquartered in Charlotte, North Carolina, Honeywell International Inc. (HON) is a multinational conglomerate, with four business groups: Aerospace, Building Technologies, Performance Materials & Technologies, and Safety & Productivity Solutions. Its current total market capitalization of $103.4 billion makes HON a mega capitalization stock (mega-cap stocks have a market capitalization value of more than $100 billion). It is considered a solid and well-diversified business with a wide economic moat and a sustainable competitive advantage over its rivals. The firm also enjoys outstanding management and corporate culture, and is a Fortune 100 company. According to Yahoo! Finance, consensus estimates call for the company to earn about $7.33 per share this year, and to go to about $8.16 per share in 2021. Honeywell has paid dividends to investors since 1887 and has increased its payments for 9 consecutive years. Its quarterly payment of 90 cents per share currently provides a yield of 2.44%.

 

The value of dividends reinvestment: A hypothetical investment in Honeywell has grown cumulatively (including dividends reinvested) 3,197.06% during the past thirty years. The same investment has grown only 1,544.99% during the same period of time, excluding dividends. During the same period of time, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively 1,451.08%, including dividends reinvested. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 40%, which means the company is paying out 40% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 58%. Its current Price to Earnings ratio (P/E --a measure of valuation) of 16.96 is 12.5% below the US Market Index, and according to Morningstar, the stock is trading at a 9% discount, making it attractive for investors with a long-term investment horizon.

 

Technically (from the chart’s perspective) HON also looks attractive, trading 20.4% below its all-time high), while it is forming a long price consolidation pattern between $151 and $101 approximately, in which $101 is acting as a strong technical support level. The actively managed mutual funds American Funds Washington Mutual A and Vanguard Dividend Growth Inv. Are major shareholders of HON, holding 0.87% and 0.69% of its shares respectively. Honeywell’s main competitors in the world are Emerson Electric Co. (EMR) and General Electric Co. (GE).

 

HON’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 1.02 so the stock is 2% more volatile than the Market. Best and worst years during the past 40 years: Its best year was 1983, in which HON returned, excluding dividends, 72.2%. On the flip side, its worst year was 2008, during the Financial Crisis, when the stock declined 46.7% excluding dividends. Honeywell’s Dividend Reinvestment Plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.

 

Disclosure: Mario Medina has no position in Honeywell International, and has no plans to initiate any position in the immediate future. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with HON and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice. Past results illustrated in the article are for reference and educational purpose only and do not guarantee future performance.

 

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