Honeywell: For Any Growth Investor
11/12/2014 8:00 am EST
In 1885, Albert Butz invented the damper flapper, an early version of a coal furnace thermostat that became the standard for regulating temperature, notes Tyler Laundon in Daily Profit.
This was also the key innovation that propelled a small company to become Honeywell (HON), which now also has significant exposure to other massive industries beyond housing, from aerospace to security.
Behind each of these industries are long-term growth trends. This is why Honeywell is such a durable investment.
The company still holds a 39% share of the thermostat market and a new wave of technologies are focused on connected homes.
The Lyric, Honeywell's new smart thermostat, shows that the company is stepping up its game and is taking demand for smart home appliances seriously.
Because of its size, most investors don't think of Honeywell as a growth company. But operational and strategic initiatives are boosting Honeywell's profit margins so that earnings are growing far faster than revenues.
Looking forward, I expect Honeywell to keep growing revenue at 4% to 5% annually and EPS in the 10% to 12% range. And I think sales of connected home products, like the Lyric, can add upside potential.
A recent 15% hike to its dividend (from $1.80 to $2.07) is a nice bonus for long-term shareholders.
Buy it for the dividend, the stability, or the likelihood that the stock will continue to outperform the market over the next decade. Honeywell should be in any growth investor's portfolio.
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