General Dynamics Corp.
) boosted its quarterly dividend by 10.7%, marking the 17th
consecutive increase. The company has increased the quarterly
dividend to 62 cents per share from 56 cents per share, bringing
the annualized payout to $2.48 per share. This comes to a healthy
dividend yield of 2.22% based on yesterday's closing price of
$111.84. The increased dividend will be paid on May 9, 2014, to
shareholders of record on Apr 11.
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A steady dividend payout policy primarily reflects General
Dynamics' robust financial position and healthy cash flow
generating capabilities. In addition, decent dividend increases
at periodic intervals have been one of the most attractive
features, providing risk-adjusted returns to its stockholders.
The latest rise comes almost after a year of its prior dividend
increase declared on Mar 2013, when it was raised by 10% to 56
With approximately $2.7 billion of free cash flow exiting 2013,
General Dynamics' solid financial position well cushions the
payout. At the end of the fourth quarter 2013, its cash and cash
equivalents stood at $5.3 billion, reflecting an increase of
almost 61.0% from year-end 2012.
This strategic decision to enhance the dividend payout comes on
the heels of better-than-expected full year 2013 results.
Although its fourth quarter 2013 earnings were in line with the
Zacks Consensus Estimate, the bottom line jumped 26.6% from the
Consistent contract wins and a stable fourth quarter performance
were also reflected in its traded price. General Dynamics' share
price closed at $111.84 on Mar 5, reflecting a gain of 18.7% so
far this year. Dividend hikes not only augment shareholders'
return but also lift the market value of the stock.
Again, the recent $1.1 trillion Omnibus bill came as a sign of
relief for the defense companies like General Dynamics. The bill
provides Pentagon with nearly $93 billion to buy weapons and
another $63 billion for research and development.
Having said that, the defense sector will still continue to face
headwinds as Pentagon's spending moderates from historical
levels. The preeminent defense stocks will however keep their
momentum intact by taking good care of their shareholders for
years to come. Despite the risk of defense budget cuts, we
believe its varied product offerings will provide General
Dynamics with a cushion against any loss in contracts.
General Dynamics currently has a Zacks Rank #3 (Hold). Other
heavyweights in the industry include
Huntington Ingalls Industries, Inc.
Lockheed Martin Corporation
). While Huntington Ingalls carries a Zacks Rank #1 (Strong Buy),
Embraer and Lockheed hold a Zacks Rank #2 (Buy).