Eaton Corporation plc

From the company website: “Eaton Corporation plc is a diversified power management company providing energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power. The company is a global technology leader in electrical products, systems and services for power quality, distribution and control, power transmission, lighting and wiring products; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. Eaton acquired Cooper Industries plc in 2012. The new company, Eaton Corporation plc, has approximately 100,000 employees and sells products to customers in more than 150 countries.”  Eaton’s CEO is Alexander M. (Sandy) Cutler.

The big story regarding ETN is their merger with Cooper Industries. The financing of this merger complicates the third quarter earnings statement. Net earnings per share was $1.02 for the third quarter of 2012, a decrease of 5% from the $1.07 earned in the record third quarter of 2011. Sales in the third quarter were $3.95 billion, 4% below the third quarter of 2011. Net income in the third quarter was $345 million compared to $365 million in 2011.

Net income in both periods included charges for integration of acquisitions. Before these acquisition integration charges, operating earnings per share in the third quarter of 2012 were $1.07 compared to $1.08 per share in 2011, a decrease of 1%. Operating earnings in the third quarter were $363 million compared to $367 million in 2011.

Eaton began steadily increasing the quarterly dividend in 2003, moving from 11 cents per share to the current 38 cents per share. The company did not raise the dividend during the Great Recession, but maintained it at 25 cents per quarter throughout 2008, 2009, and the first two quarters of 2010.  If the company continues the pattern of the past two years, it could announce a dividend increase in January.  The dividend was raised from 34 cents to 38 cents per quarter in January, 2011.  The current annual dividend rate is $1.52. At a December 26, 2012 closing price of $53.84, the yield is 2.8%.

I own shares of ETN in a retirement income account and I would consider buying more at $44.71 or less.  I would consider selling some of the shares at $59.31 or higher.  I will adjust these figures if ETN continues its pattern of increasing its dividend in the first quarter.

I think ETN a company worth investigating for inclusion in a dividend portfolio. It can add a growth component to a dividend portfolio and it provides global industrial exposure. This is not a recommendation to buy, but a suggestion for a stock to study. Do your own due diligence and use your own judgment.