Four Days Left To Buy Honeywell International Inc. (NASDAQ:HON) Before The Ex-Dividend Date

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Honeywell International Inc. (NASDAQ:HON) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Honeywell International's shares on or after the 15th of August, you won't be eligible to receive the dividend, when it is paid on the 5th of September.

The company's next dividend payment will be US$1.13 per share. Last year, in total, the company distributed US$4.52 to shareholders. Looking at the last 12 months of distributions, Honeywell International has a trailing yield of approximately 2.1% on its current stock price of US$216.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Honeywell International can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Honeywell International paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.

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.

Check out our latest analysis for Honeywell International

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Honeywell International's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Honeywell International has lifted its dividend by approximately 8.1% a year on average.

Final Takeaway

Should investors buy Honeywell International for the upcoming dividend? Honeywell International has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear unsustainable. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Honeywell International's dividend merits.

With that being said, if dividends aren't your biggest concern with Honeywell International, you should know about the other risks facing this business. For example, we've found 1 warning sign for Honeywell International that we recommend you consider before investing in the business.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.