Aircraft Parts Maker TransDigm To Pay Large Special Dividend

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Aircraft component makerTransDigm Group ( TDG ) isn't known for paying dividends to shareholders, but it's now making a big exception.

The Cleveland-based firm announced Monday that its board of directors approved a special dividend of $12.85 a share. TransDigm will pay the dividend Nov. 5 to shareholders of record Oct. 25.

Investors who want the outsized payout will need to buy the stock before the ex-dividend date, which is generally two business days before the record date.

TransDigm's special dividend gives its stock a yield of 8.6%, the biggest in the Aerospace/Defense group. Group members Boeing ( BA ),General Dynamics ( GD ) andNorthrop Grumman ( NOC ) have yields of 2.4% to 3.1%. All three pay regular quarterly dividends.

Companies tend to pay dividends from its earnings, but TransDigm will use funds from a recent note offering by its one of its subsidiaries, existing cash on hand and money from a term loan to cover the large payout to shareholders.

"With the senior subordinated notes offering, incremental term loan of $150 million and the $12.85 per share special cash dividend, we believe we will have put in place a more efficient capital structure," said CEO Nicholas Howley in a press release.

TransDigm lost money back in 2003, but has delivered higher profits each year since. It has a three-year stability factor of 10, indicating a steady stream of income.

In its latest four quarters, earnings grew 42% to 72%. Sales growth ranged from 39% to 54% over the same period. TransDigm's profit and revenue gains are well above the minimum 25% increases for leading stocks.

Analysts polled by Thomson Reuters see earnings jumping 50% to $6.71 a share for its fiscal 2012, up from 34% growth in fiscal 2011. The company raised guidance for full-year profit and sales in August.

TransDigm has been in a sharp uptrend for years. Despite recent increasing market volatility, the stock is just shy of an all-time high and extended after clearing a 136.44 buy point from a flat base in August.

In another sign of strength, the stock's Relative Strength line has hit an new high ahead of price.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: BA , GD , NOC , TDG

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