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Sep 29

DT Assessment: Eaton Corporation (ETN)

Eaton Corporation is involved in power management and the provision of energy-efficient solutions within the electrical, hydraulic and mechanical power industries.  They have five main segments: Electrical, Hydraulics, Aerospace, Truck and Automotive.  Headquartered in Ireland with over 100,000 employees, they have been in operation for over 100 years and have an impressive record of 90 years of uninterrupted dividend payments to shareholders.

Financial Information

  • Revenue over last 12 months: $19.2 Billion
  • Profit in last 12 months: $1.4 Billion
  • Company Assets: $35.8 Billion
  • Company Debt: $20.8 Billion
  • Cash and Equivalents: $1.1 Billion

Eaton Corporation is a major player within the industries they operate in, and revenues they earn will have a tendency to parallel overall market strength.  Revenues were down immediately after the recession but have climbed up steadily since – most likely driven by Eaton’s customers replacing aging equipment coupled with a shift towards improvement in overall energy efficiency within their operations.

Profits, on the other hand, are dictated by cost of material and equipment, cost of labour, and of course the amount they can charge for their products and services.  Currently, the profit margin for Eaton is around 7%, which is low in comparison to many other dividend paying companies.

Eaton Corp

 

Dividend Information

As stated above, Eaton has a very impressive record of 90 years of uninterrupted dividends.  Equally important is the growth of the dividend – over the past five years the dividend has grown at a rate of nearly 11%.  Yield on ETN shares is quite moderate at just under 2 and half percent, making it a pretty safe dividend as well.

Stock Performance

Since the recession, Eaton has been a great success story for investors, with the stock price climbing from the $20/share range up to the nearly $70 range where it is today – this is considerably above the $40 to $50/share range where it traded at is peak just before the recession.

Dividend Tactics Assessment

DT Score:  552

Eaton’s dividend payment history and revenue generation ability are very attractive to any dividend investor.  Equally attractive is the recent history of dividend increases and overall capital gain.  Going forward the rate of increase will most likely taper off; however, the company remains a solid investment for anyone looking for exposure into the industrial sector.  If they can focus on improving profit margins going forward it will make them even stronger.

Disclaimer: I currently own Eaton shares within my portfolio