Eaton Corporation Hikes Dividend Eight Consecutive Years, Offers 3.5% Yield (ETN)
By: Ned Piplovic,
Eaton Corporation plc (NYSE:ETN) rewarded its investors with annual dividend boosts over the past eight consecutive years. In addition to a multi-year record of raising dividends, the company currently offers its shareholders a 3.5% dividend yield.
The company’s share price edged its price level from one year ago only marginally but combined with the dividend income distributions for a total return on shareholders’ investment of nearly 10% over the past year.
The company will distribute its next dividend on the May 18, 2018, pay date to all its shareholders of record before the May 3, 2018, ex-dividend date.
Eaton Corporation plc (NYSE:ETN)
Headquartered in Dublin, Ireland, and founded in 1916, the Eaton Corporation plc operates as a power management company through five separate business segments. The company’s Electrical Products segment offers electrical components, single phase power quality products, emergency lighting and fire detection products, wiring devices, structural support systems and circuit protection and lighting products. Additionally, the company’s Electrical Systems and Services segment provides power distribution assemblies, three-phase power quality products, hazardous duty electrical equipment, explosion-proof instrumentation, utility power distribution equipment, power reliability equipment, and services. The Hydraulics business segment offers various power products, controls and sensing products, fluid conveyance products, filtration systems solutions, industrial drum and disc brakes and golf grips.
Furthermore, the company’s Aerospace segment provides hydraulic power generation systems, controls and sensing products, fluid conveyance products and fuel systems for commercial and military use. Finally, the company’s Vehicle segment designs, manufactures, markets and supplies drivetrain and powertrain systems, as well as critical components, including transmissions, clutches, hybrid power systems, superchargers, engine valves and valve actuation systems, cylinder heads, locking and limited slip differentials, transmission controls, fuel vapor components and fluid.
Following an initial slow ascent of more than 6% between April 25, 2017, and mid-July 2017, the company’s share price reversed direction and declined 12.6% to reach its 52-week low price of $70.44 on August 28, 2017. After bottoming out at the end of August 2017, the share price embarked on a four-month uptrend. The share price rose 24.7% before it reached the 52-week high of $87.86 on February 1, 2018. Since peaking at the beginning of February 2018, the share price declined more than 13% to close on April 24, 2018, at $75.93. This closing price was just 0.6% above the closing price one year earlier, almost 8% higher than the 52-week low from late August 2017 and 23% higher than it was five years ago.
The company’s current $0.66 quarterly dividend distribution is 10% higher than the $0.60 payout from the same quarter the previous year. This current payout amount is equivalent to a $2.64 annualized distribution and yields 3.5%, which is nearly 16% higher than Eaton Corporation’s 3% average yield over the past five years.
The company started paying dividends in 1923 and has boosted its annual payout over the past eight consecutive years. Over that period, the company enhanced its total annual dividend payout nearly five-fold by boosting its annual payout amount at an average growth rate of almost 22% per year. Eaton Corporation’s current dividend payout ratio of 37% is 24% lower than the company’s own 49% average payout ratio over the past five years. A low dividend payout ratio, such as Eaton’s current 37% level, generally indicates that the company can support continued dividend distributions and annual dividend hikes for the foreseeable future.
In addition to outperforming its own past dividend yields, Eaton’s current yield outperformed average industry yields as well. The company’s 3.52% yield is three times higher than the 1.15% average yield of the entire Industrial Goods sector ang 154% higher than the 1.37% average yield of all the companies in the Industrial Electrical Equipment market segment. Isolating the companies that distribute dividends raised the average yield of the Industrial Electrical Equipment to 1.61%. However, Eaton Corporation’s 3.05% yield is still 116% higher than the average yield of only dividend-paying companies in the Industrial Electrical Equipment segment
While the share price rose only marginally since late April 2017, the company’s dividend income provided the company’s shareholders with a total return of nearly 10% over the past 12 months. The total return over the past three years came in at 23% and the shareholders enjoyed a 53% total return on their investment over the past five years.
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