United Technologies is a major component of the S&P 500 and Dow Industrials indexes. The company is also a dividend achiever, which has been consistently increasing its dividends for 15 consecutive years. From the end of 1998 up until December 2008 this dividend growth stock has delivered an annual average total return of 8.70% to its shareholders.
At the same time company has managed to deliver an impressive 21.80% average annual increase in its EPS since 1999. Analysts are expecting a slight decline in overall earnings per share in 2009 to $4.70 due to the economic crisis which could hit UTX’s segments
The ROE has remained largely between 20% and 25% with the exception of a temporary dip in 1999 to 14%.
Annual dividends have increased by an average of 15.10% annually since 1999, which is lower than the growth in EPS. A 15 % growth in dividends translates into the dividend payment doubling almost every five years. Since 1970 United Technologies has actually managed to double its dividend payment almost every eight years on average.
The dividend payout has largely remained below 30% over the past decade. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
In addition to that UTX has sufficient cash flow to maintain and even increase the dividend in 2009.
United Technologies is currently attractively valued. The stock trades at a P/E of 9, yields 3.50% and has an adequately covered dividend payment. I would be a buyer of UTX at current prices, as long as it does not increase above $51.50.
Full Disclosure: Long UTX
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