Honeywell International Inc. (HON) Beats General Electric Company (GE) On The Following 4 Points

In contrast, Honeywell has put additional focus on software engineering, with nearly 11,000 engineers working on software instead of more classic industrial goods. The software business is better, as it enables more combinations of services and drives higher margins. Honeywell certainly has some solid growth potential for future investing.

Source: Honeywell Q4 2016 Presentation.

Earnings

Source: YCharts

When looking at revenue perspectives, we can see both companies will not burst expectations with soaring numbers in upcoming years. However, when looking at earnings, we can clearly see that Honeywell International Inc. (NYSE:HON) is exhibiting success improving their earnings compared to General Electric. Honeywell International Inc. (NYSE:HON) management expects to grow EPS by 6% to 10% while GE expects growth of 3% to 5%.

General Electric Company (NYSE:GE) will have a hard time replacing GE Capital’s profit potential through core industrial segments. Additionally, its Alstom integration has proven less profitable than expected so far due to speed bumps during the integration process.

Honeywell’s strong position in the aerospace industry, and safety products will help the company benefit from an aircraft upcycle. Did you know that HON won 100% of the jet propulsion engine competitions for medium-to-large business jets since 2001? That’s a very good batting average!

Dividend Perspective

Source: YCharts

GE’s current payout ratio seems under control with a 75% ratio. However, when we use the cash payout ratio, we can see the company is bleeding cash at the moment (the ratio is at -327%).

Remember, the payout ratio is a reliable indicator of a company’s ability to sustain its dividend, but it remains based on accounting numbers, not real cash. Even then, with slow revenue and earnings growth, a 75% payout ratio doesn’t give you much room for growth.

Honeywell International Inc. (NYSE:HON)’s management announced last year that its dividend payout ratio will increase in the upcoming 4 years. They were able to keep it around 40% for the past 5 years, but now feel it’s the time to reward investors. The dividend payment increase was of 15% and 11.76% in 2016. I’m not putting on my rose-colored glasses, and expecting a 12% dividend growth in the next 10 years, I can appreciate the growth will be significant for several years to come. In comparison, Honeywell clearly has more room than GE to boost their payouts in the upcoming years.