Long Term Investors Shouldn’t Ignore This Key Financial MetricYou don’t often hear a lot about United Technologies Corporation (UTX) these days; it’s an old economy name that doesn’t seem to garner much attention from the media.
Nevertheless, the company that makes elevators, helicopters, airplane engines, and HVAC (heating, ventilation, and air conditioning) and fire/security systems continues to perform excellently. It’s a component of the Dow Jones Industrial Average, and the stock’s had an exceptional year. (See “The One Market Sector That’s Consistently Outperforming the Rest.”)
Approximately $17.0 billion of the company’s total sales in 2012 came from its “UTC Climate, Controls and Security” business. Next was “Pratt & Whitney” aircraft engines at $14.0 billion. “Otis” elevators and escalators brought in $12.0 billion in sales last year, followed by “UTC Aerospace Systems” at $8.3 billion and “Sikorsky” helicopters at $6.8 billion.
As a conglomerate with a strong constituent in aerospace, United Technologies has an excellent track record of increasing its dividends to stockholders.
In 2012, the company increased its common share dividend by a total of 11.5%, representing its 76th consecutive year of paying dividends. According to the company, from fiscal year-end 2002 to year-end 2012, United Technologies delivered a 225% total return to shareholders, which is more than double the total return of the DOW or S&P 500.
In 2008, the company paid out $1.35 in total dividends per share. By the end of last year, that figure was $2.03 per share.
Of the company’s total sales, 40% are in the U.S. market, followed by 26% in Europe and 20% in the Asia Pacific region.
Since the recession, United Technologies’ sales, earnings, and earnings per share haven’t been all that consistent. But what has been consistent is the company’s growth in its cash dividends on common shares, and that’s a big part of this story as an equity investment. The company’s split-adjusted long-term stock chart is featured below:
Long Term Investors Shouldn’t Ignore This Key Financial Metric
Chart courtesy of www.StockCharts.com
This is a very good track record from a mature, large-cap enterprise that isn’t making headline news that often. What I like is the consistency of performance on the stock market and, more importantly, the company’s excellent track record of increasing its dividends.
If you are a dividend investor or a long-term investor who does not require quarterly income but would benefit from dividend reinvestment, you may want to consider United Technologies with its track record of increasing dividends.
United Technologies is a slow-growth business that operates at the whim of government spending and the economy in general, yet its track record on the stock market, even when excluding dividends, is excellent.
Why this stock is so successful is because of the management of its cash flow and the reliable expectation of increasing dividends going forward. It’s a powerful metric that long-term investors crave.
United Technologies is a benchmark company that I like, and it is worthy of serious consideration by long-term investors on a major share price retrenchment. For these investors, dividend reinvestment from a company that reliably increases its annual dividends is a powerful financial metric not to be ignored.
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