Lennox International Vs Carrier Global

Lennox International Inc. ($LII)

Lennox International Inc. makes air conditioning, heating, and refrigeration systems. These products include commercial refrigeration units that you might see at a grocery store or gas station, residential HVAC units that many Americans use to stay cool during summer and warm during winter, and commercial HVAC systems that heat and cool office buildings and other large properties. The company sells these products in the United States, Canada, Latin America, and the Caribbean.

Lennox International dates all the way back to 1895. And, the company has raised its dividend every year for 15 years.

These raises are typically inflation-beaters, with Lennox achieving a 5-year compound annual dividend growth rate of 9.05%. The company’s last dividend raise, in May of this year, was a 13% increase. So, dividend growth is accelerating — always a good sign.

In terms of valuation and stock performance, Lennox trades at a price to earnings ratio of 24.68 which is roughly in-line with the general market.

Lennox’s 10-year average annual total returns, however, beat the market. Lennox delivered a 10-year average annual total return of 18.20%, outperforming Vanguard’s S&P 500 ETF by more than 4% per year.

There is one downside to this stock, however, and that is the starting dividend yield.

Lennox International pays a relatively paltry 0.89% starting yield. However, the company’s payout ratio of 20.24% means this dividend is well-covered and should have plenty of room for future growth.

• Forward PE ratio of 24.68

• 0.89% starting dividend yield

• 5-year dividend CAGR of 9.05%

• Payout ratio of 20.24%

• 10-year average annual total return of 18.20%

Overall, Lennox International is a fairly priced market-beater with inflation-beating dividend growth.

Some investors may not like the starting yield. But, Lennox has been in business for over 125 years. And, per “The Rule Of 72,” Lennox’s 9.05% dividend CAGR would indicate that shareholders would double their yield on cost within 7.73 years.

Carrier Global Corporation ($CARR)

Carrier Global Corporation is a company that traces its corporate roots back to 1915. And while this business has been bought and sold by many larger entities over the years, it’s still a firm with over 100 years of operating history.

Which makes Carrier Global Corporation’s recent market performance incredibly interesting…

In 2020, Carrier Global was spun-off from United Technologies Corporation. The spin-off occurred in March of 2020, not exactly the best time to go public. Between the apocalyptic market sentiment of the time and Carrier’s strong business fundamentals, this stock has gone on to absolutely demolish the general market.

Carrier Global Corporation has delivered a 5-year average annual total return of 37.22%. And, the company has achieved an inflation-beating compound annual dividend growth rate of 60.98%.

Like Lennox International, Carrier Global Corporation operates in the HVAC and refrigeration space.

Carrier Global Corporation makes residential air conditioners, commercial HVAC units, commercial refrigeration units, refrigerated trucks, and refrigerated shipping containers. This company is a little more tied to the global supply chain than Lennox. And Carrier stock has worse 12-month performance than Lennox International.

But zooming out, Carrier Global is a market-beater with a reasonably low valuation and a safe dividend payout ratio.

Despite its 5-year average annual total return of 37.22%, Carrier Global Corporation trades at a price to earnings ratio of just 21.89. Additionally, the firm has a 1.36% starting dividend yield and a low payout ratio of just 30.03%.

Carrier Global’s 5-year dividend CAGR is somewhat skewed.

This is due to the fact that Carrier only issued two dividend payments in 2020. Doing some quick math, 23.82% is more accurate compound annual growth rate — still an impressive number that beats inflation.

• Forward PE ratio of 21.89

• 1.36% starting dividend yield

• 5-year dividend CAGR of 60.98%

• Payout ratio of 30.03%

• 5-year average annual total return of 37.22%

Carrier Global Corporation offers a higher starting yield and faster dividend growth rate than Lennox International. Carrier also trades at a slightly lower valuation, although both firms are reasonably valued considering their market-beating performance.

As a recent spin-off, Carrier has less of an independent track record compared to Lennox. But, Carrier Global is still an established company with strong dividend growth and a safe dividend payout ratio.