The company has managed to deliver an increase in EPS of 10.60% per year since 2001. Analysts expect United Technologies to earn $5.36 per share in 2011 and $6.08 per share in 2012. This would be a nice increase from the $4.74/share the company earned in 2010.
The backlog in commercial airplanes at Boeing and Airbus until 2013 is one positive fact for United Technologies. Another plus will be orders to Otis for the new World Trade Center. The introduction of the Boeing 787 would also be positive for revenue growth. United Technologies generates 60% of its revenues from outside the US. Growth in emerging markets such as China would certainly add to the bottom line.
Over the past decade, the return on equity has consistently remained above 20%. 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 15.90% per year since 2001, which is higher than the growth in EPS.
A 16% growth in distributions translates into the dividend payment doubling every four and a half years. If we look at historical data, going as far back as 1977, we see that United Technologies has actually managed to double its dividend every eight and a half years on average. The company tends to raise dividends every five quarters, rather than every four quarters.
Over the past decade the dividend payout ratio has steadily increased, as dividends increased at much higher rate than earnings. While this indicator is at 36%, there is still more room for high dividend growth. 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 trading at 17.50 times earnings, yields 2.20% and has a sustainable dividend payout. The stock is close to my entry criteria, and could be a buying opportunity on dips below $77.
Full Disclosure: Long UTX