The company has managed to deliver an increase in EPS of 10.60% per year since 2001. Analysts expect United Technologies to earn $5.36 per share in 2011 and $6.08 per share in 2012. This would be a nice increase from the $4.74/share the company earned in 2010.
Over the past decade, the return on equity has consistently remained above 20%. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 15.90% per year since 2001, which is higher than the growth in EPS.
A 16% growth in distributions translates into the dividend payment doubling every four and a half years. If we look at historical data, going as far back as 1977, we see that United Technologies has actually managed to double its dividend every eight and a half years on average.
Over the past decade the dividend payout ratio has steadily increased, as dividends increased at much higher rate than earnings. While this indicator is at 36%, there is still more room for high dividend growth. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently United Technologies is trading at 18.40 times earnings, yields 2.30% and has a sustainable dividend payout. The stock is close to my entry criteria, and could be a buying opportunity on dips below $77.
Full Disclosure: Long UTX
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