Honeywell International (HON -0.32%) is a relatively new member of the Dow Jones Industrial Average (it was added in 2020). It sports a 2.2% dividend yield, which seems modest given the broader market's yield of around 1.7%. But given the generous 10% annualized dividend growth rate over the past decade, income investors focused on dividend growth will want to take a closer look while the bears have control of the market. Here's why.

Not every year is a good one

One of the first things to note is that Honeywell's dividend has been increased annually for a little over a decade, making it a Dividend Achiever. That's good, but not the most impressive streak. But if you take a closer look, the company's dividend history is actually much better than it seems, because sometimes the dividend gets held steady during difficult periods. If you go back to the turn of the century, Honeywell's dividend has not been cut, and has grown roughly 475%. This is more than just a 10-year story.

A person looking at a computer screen in a factory with robotics technology in the background.

Image source: Getty Images.

That record makes some sense, however, given that Honeywell is an industrial stock. Industrials tend to be cyclical, which means that their performance ebbs and flows with the economy. That helps explain why the stock price has fallen around 20% from its 2021 highs, with most of the decline showing up in 2022. Note that the U.S. experienced two quarters of declining gross domestic product, which is the unofficial sign of a recession. 

All in, there's nothing particularly shocking going on that should have investors worried about Honeywell. This is all just par for the course for a cyclical industrial stock.

Honeywell is still a strong company

So why jump on the pullback in this reliable dividend grower's shares? There are plenty of reasons.

For starters, with a market cap of around $120 billion, Honeywell is an industrial giant. It has the size to compete globally and the wherewithal to take a few hits and survive to fight another day. On that score, having an investment-grade-rated balance sheet helps a great deal. It's highly likely that, even during an economic downturn, Honeywell will have ample access to capital to see itself through the rough patch.

Meanwhile, its business is diverse and includes some very attractive niches. The company's business segments include aerospace, building technologies, performance materials and technologies, and safety and productivity solutions. Every area won't do well at the same time, but overall the company has an attractive portfolio that is increasingly focused on the digital space. That has the potential to smooth out the ups and downs of the cycle as more subscription-like services are brought out.

At this point, management said it believes the company can grow organic sales between 4% and 7% on an ongoing basis. It also expects to continue improving its segment margins, which should lead to more cash flowing into earnings per share over time. Notably, over the past five years or so, segment margins improved from 13.5% to around 21%. So this isn't a hope and a dream -- the company is executing well on its internal efficiency goals. 

Time to act

The big takeaway here is that investors can buy a diversified industrial company that's less and less cyclical and more profitable at a price that's around 20% off recent peaks. Clearly, investors looking for a high yield probably won't be all that interested, but if dividend growth is what you're after Honeywell's strong business history and outlook should be pretty enticing, since it suggests more dividend hikes are likely to come. If you can think past the current bear market and the potential for a recession, this Dow stock looks like it could be an attractive long-term dividend growth opportunity today.