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United Technologies Corporation Stock Analysis

United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. This dividend achiever has paid dividends since 1936 and increased distributions on its common stock for 17 years in a row.

The company’s last dividend increase was in February 2012 when the Board of Directors approved a 12.90% increase to 48 cents/share. The company’s largest competitors include Honeywell (HON), General Electric (GE) and Boeing (BA).

Over the past decade this dividend growth stock has delivered an annualized total return of 9.80% to its shareholders.

The company has managed to deliver 10.60% in annual EPS growth since 2002. Analysts expect United Technologies to earn $5.52 per share in 2012 and $6.68 per share in 2013. In comparison United Technologies earned $5.49/share in 2011.

United Technologies has managed to maintain a consistently high returns on equity in the 20% - 25% range over the past decade. 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 15.30% per year over the past decade, which is higher than to the growth in EPS. This has led to an expansion in the dividend payout ratio for the company. United Technologies tends to boost dividends after five quarters, and not after our quarters like other companies.

A 15% growth in distributions translates into the dividend payment doubling almost every four and a half years. If we look at historical data, going as far back as 1974 we see that United Technologies has managed to double its dividend every seven and a half years on average.

The dividend payout ratio has increased over the past decade, rising from a low of 22% in 2002 to 34% in 2011. This explains the fact that dividend growth has been faster than earnings growth 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.

Currently, United Technologies is attractively valued at 15.40 times earnings, yields 2.60% and has an adequately covered dividend. I would consider adding to my position in the stock subject to availability of funds.

Full Disclosure: Long UTX

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This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].