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By Jeff Bailey

Honeywell (NYSE:HON), which has outperformed General Electric (NYSE:GE) in recent years, plans to distribute an increasing share of its earnings in the form of dividends over the next five years, a change in policy.

(click to enlarge)

HON Dividend Chart

HON Dividend data by YCharts

For the last five years, Honeywell has boosted its payout roughly in line with increases in earnings. In an investor presentation, Honeywell says it now plans for dividends to rise faster than earnings through 2018.

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HON Cash from Operations (NYSE:<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

HON Cash from Operations (TTM) data by YCharts

About half of cash from operations is planned to go to dividends and to fund enough stock buybacks to keep shares outstanding flat. The other half of cash from operations will fund capital expenditures and acquisitions.

The Honeywell payout ratio appears low enough that dividend hikes over-and-above the rate of earnings increases shouldn’t be a problem.

(click to enlarge)HON Payout Ratio (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

HON Payout Ratio (TTM) data by YCharts

Dividend yield is one of the few areas in which General Electric shares outshine Honeywell.

(click to enlarge)HON Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

HON Dividend Yield (TTM) data by YCharts


Source: Honeywell Dividend Growth To Accelerate