The current bull market hides many companies’ flaws. In fact, since 2009, almost all stocks have gone up one way or another. My 11-year-old boy could probably do as well as most investors on the Street. This situation makes it even more difficult for investors to differentiate the good picks from the bad seeds.
While Honeywell International Inc. (NYSE:HON) clearly outperformed General Electric during this period, most GE shareholders won’t complain about its performance. I know that General Electric is a very popular stock among investors. The company has been around for over 100 years, and has performed quite well for decades. However, I believe the current bull market is hiding many flaws, and Honeywell is a better option for those who are looking to add an industrial stock to their portfolio. Ironically, Honeywell failed to merge with General Electric back in 2001.
As a dividend growth investor, my focus when analyzing companies is payouts and potential increases. In order to do so, I have studied 3 components leading to sustainable payment increases as per the 7 dividend growth investing principles:
– Revenue trend
– Earnings trend
– Dividend and payout ratio trend
I will compare both companies using those metrics, and conclude my analysis with a valuation of both stock prices.
While Honeywell’s revenue growth over the past 5 years is far from being spectacular, General Electric is having several problems generating growth. This is obviously caused by the sale of GE Capital, a lucrative but highly volatile segment. The most recent bump in 2016 results is due to the acquisition of Alstom. Over the past few years, General Electric has focused on restructuring their “GE Store”:
Source: GE China Investor Forum Presentation