Defense budget cuts are hitting U.S. defense contractors'
sales growth, but their dividends are still on target.
) on July 24 reported second-quarter adjusted earnings that fell
14% to $1.41, missing views. Sales topped forecasts but slid 7%
to $5.7 billion amid declines in Raytheon's Integrated Defense
Systems and Missile Systems units.
The Waltham, Mass.-based defense contractor has seen more
business from overseas customers as U.S. military spending slows.
But on Thursday, it received a $52 million award from the U.S.
Army to continue producing its Excalibur Ib precision guided
Earnings growth slowed to the single digits the past three
years; still, earnings have risen each year since 2004.
Raytheon's three-year Earnings Stability Factor of 3 on a scale
of 0 (most stable) to 99 (most volatile) reflects those steady
gains. Despite recent downward revisions, analysts expect profit
growth to continue at 8% this year and 13% the next.
Raytheon has increased its quarterly dividend payout each year
from 20 cents a share in 2004 to its current 60.5 cents, which
works out to $2.42 for the full year. That translates to a 2.7%
annualized yield, ahead of the S&P 500's 1.94%.
The stock is building the bottom of a flat base that it
started in early March. If it continues basing to shape the right
side, the potential buy point would be 102.43. But Raytheon has
some work to do, since it remains below both its 10-week and
40-week moving average lines.
Another government defense contractor,Lockheed Martin (
), beat Q2 sales and profit forecasts on July 22. The Bethesda,
Md.-based F-35 maker also owns a three-year Earnings Stability
Factor of 3. It's boosted its quarterly payout from 11 cents a
share in 2000 to $1.33 for a 3.4% annual yield.
The stock is hovering near a 168.97 flat-base buy point, which
it initially cleared July 24 in above-average volume.