Entering text into the input field will update the search result below

Honeywell's Buyback Program Is A Powerful Catalyst For Its Stock

Mar. 11, 2020 12:07 AM ETHoneywell International Inc. (HON)10 Comments


  • Honeywell has been accelerating its buyback program in the past four years. I expect this to continue.
  • As a result, its share count has been reduced by over 10% in the past 10 years. In fact, in the past 5 years, the share count has fallen by 9%.
  • Honeywell has plenty of cash flow to continue doing this. Its FCF yield is over 5%, and up to 70% of that is used for buybacks.
  • Based on this, the stock is at least 16% undervalued, or worth $187.50 per share.
  • This idea was discussed in more depth with members of my private investing community, Total Yield Value Guide. Get started today »

Honeywell's Buyback Program Is A Major Catalyst for Its Stock

Honeywell International, Inc. (NYSE:NASDAQ:HON) is in the middle of a $10 billion buyback program authorized by its board. As of December 31, 2019, there was still $7 billion left in that program. Since HON stock has a $115 billion market value, this represents 6% of its total market capitalization.

This has produced great results for the company. For one, the share count has fallen over 10% in the past 10 years. You can see this in the chart below:

(Source: Hake)

This includes my estimate for the share count drop this year. What is most interesting is from this chart is that the company has been accelerating its share count reduction in the past five years. From 2014 to the end of 2019, the number of shares outstanding has been cut by 9.0%.

Honeywell certainly has the FCF to do this. Its FCF has been accelerating, as well as the portion allocated to buybacks. You can see this in the two charts below that I have put together:

(Source: Hake)

This clearly shows that the amount of money the company dedicated to buybacks is increasing, both in dollar terms and as a proportion of its FCF.

In Honeywell's earnings press release, management said that its base case goal for the share buyback program is a reduction of at least 1% every year in its share count. So far, the company has well exceeded that in the past five years.

As A Result, Its Dividends Per Share Have Increased

The growth in Honeywell's dividends per share has been much faster than its cost for those dividends. This is a direct result of the company's buyback program.

You can see this in the tables below.

(Source: Hake)

This shows that the Dividend

Total Yield Value Guide

Extensive financial analysis of high total yield and deep value stocks

The Total Yield Value Guide follows high dividend yield, and high buyback stocks (total yield) and stocks with abundant net cash, cash flow, and catalysts. Our focus on high buyback yield stocks (buybacks/market price) plus high dividend yield is unique. These stocks tend to perform well over time.

Subscribers receive exclusive articles, model spreadsheets on stocks published both here and on other sites, access to my historical articles and a chat room.

Subscribers also receive a free two-week trial to review the service.

Here is the link to subscribe.

This article was written by

Mark Hake profile picture
Extensive financial analysis of high total yield and deep value stocks

Mark R. Hake, CFA, has been a consultant to various companies, including hedge funds, software, and technology companies. Prior to that, Mr. Hake was President of Hake Investment Research and Hake Capital Management. He has been featured in Barron’s, CNBC, Bloomberg, and other news organizations as a contrarian investor and deep value specialist.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.