Honeywell Automation India's (NSE:HONAUT) Dividend Will Be Increased To ₹85.00

Honeywell Automation India Limited's (NSE:HONAUT) dividend will be increasing to ₹85.00 on 10th of September. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

View our latest analysis for Honeywell Automation India

Honeywell Automation India's Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Honeywell Automation India's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 26.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was ₹10.00, compared to the most recent full-year payment of ₹85.00. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Honeywell Automation India has seen EPS rising for the last five years, at 27% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Honeywell Automation India Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. See if management have their own wealth at stake, by checking insider shareholdings in Honeywell Automation India stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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