Does Honeywell International Inc. (HON) Pass Buffett’s Test?

Johnson Controls Inc (NYSE:JCI) is involved in both the building control and HVAC market and in the auto components market. Johnson controls serves some of the biggest automobile companies, including Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). However, as the competitive position of these companies weakens, Johnson Controls needs to find new growth opportunities. While the company tried to improve its competitive position through the acquisition of A123 Systems’ assets, it lost out to Chinese company Wanxiang America. While this failed bid may have been bad for Johnson Controls, it was good for Exide Technologies (NASDAQ:XIDE), which will not suffer from the competitive advantages Johnson would have gained through this acquisition.

Like Johnson Controls, BorgWarner also benefits from its relationship with large automobile companies like Ford Motor Company (NYSE:F). However, it also faces pressure to continue offering the best technological innovations and keeping costs down in order to maintain its supplier relationship with these companies.

Businesses with consistently high ROIC show that they’re efficiently using capital. They also have the ability to treat shareholders well, because they can then use their extra cash to pay out dividends to us, buy back shares, or further invest in their franchise. And healthy and growing dividends are something that Warren Buffett has long loved.

The article Does Honeywell Pass Buffett’s Test? originally appeared on Fool.com and is written by Jim Royal.

Jim Royal has no position in any stocks mentioned. The Motley Fool recommends BorgWarner, Ford, and General Motors. It owns shares of Ford and Textron.

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