Here's Madison Dividend Income Fund's Investment Thesis for Honeywell (HON)

Madison Investments, an investment advisor, released its “Madison Dividend Income Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the fund (Class Y) returned +3.2% compared to the -4.3%, +2.1%, and +1.7% returns for the S&P 500 Index, Russell 1000 Value Index, and Lipper Equity Income peer group. The firm views that since late 2022, the shift from dividend stocks to non-dividend tech stocks has created a unique opportunity to buy high-quality dividend stocks at below-average valuations. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Madison Dividend Income Fund highlighted stocks such as Honeywell International Inc. (NASDAQ:HON). Honeywell International Inc. (NASDAQ:HON) is an innovation and technology company that provides aerospace technologies, industrial automation, building automation, and energy and sustainable solutions. The one-month return of Honeywell International Inc. (NASDAQ:HON) was -5.95%, and its shares gained 2.78% of their value over the last three months. On April 25, 2025, Honeywell International Inc. (NASDAQ:HON) stock closed at $199.16 per share with a market capitalization of $129.127 billion.

Madison Dividend Income Fund stated the following regarding Honeywell International Inc. (NASDAQ:HON) in its Q1 2025 investor letter:

"This quarter we want to highlight Honeywell International Inc. (NASDAQ:HON) as a high-quality relative yield investment in the Industrial sector. HON is a premier industrial company with leading positions in Aerospace (40% of revenues), Industrial Automation (26%), Building Automation (17%) and Safety and Productivity Solutions (17%). A common theme across these end markets is that HON embeds its products into the operations of its customers, which generates long-term recurring revenue from aftermarket products/services. We believe HON has a sustainable competitive advantage due to its scale, high customer switching costs, intangible assets, and long history of innovation. Many HON products are a low percentage of its customers’ total costs, and these products get designed into products and operations, which provide a long-term source of consistent revenue.

HON recently announced plans to break the company into three separate entities by the end of 2026, which we believe will create shareholder value. The three stand alone companies will be Honeywell Aerospace, Honeywell Automation, and Advanced Materials. These businesses are likely to have better focus, different levels of capital intensity, and different growth profiles as stand-alone entities. Activist investor Elliott Management also owns a $5 billion stake, which is the largest activist investment the firm has made in its history. Valuation appears attractive at 18x forward expected earnings, which is a less than market multiple..." (Click here to read the full text)

 Honeywell International Inc. (NASDAQ:HON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held Honeywell International Inc. (NASDAQ:HON) at the end of the fourth quarter, compared to 55 in the third quarter. While we acknowledge the potential of Honeywell International Inc. (NASDAQ:HON) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Honeywell International Inc. (NASDAQ:HON) and shared the list of best edge computing stocks to buy according to hedge funds.

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Disclosure: None. This article is originally published at Insider Monkey.