A few days after its fourth quarter earnings release,
L-3 Communications Holdings Inc.
) has increased its dividend as well as announced a new share
repurchase program. The company focuses on program execution,
operational efficiency and disciplined cash deployment which make
incremental dividend payouts feasible lending increasing value to
L-3 Communications has increased its quarterly dividend by 10%,
bringing the annualized dividend to $2.20 per share from the
previous payout of $2.00 per share. Following the hike, the
company will now pay a quarterly dividend of 55 cents as against
the 50 cents paid earlier. The said dividend will be paid on Mar
15, 2013, to shareholders of record as of the close of business
on Mar 1, 2013.
This is the company's ninth consecutive annual dividend increase.
Last February, the company had increased the quarterly dividend
by 11% to 50 cents per share.
As per the new share repurchase program, the company is permitted
to repurchase up to an additional $1.5 billion of the company's
common stock through Jun 30, 2015. This is the company's sixth
repurchase program and is effective immediately. The company
plans to fund the program from its cash on hand and cash
generated from operations.
Recently, L-3 Communications Holdings reported its fourth quarter
2012 financial results with earnings per share of $2.25
surpassing the Zacks Consensus Estimate of $2.12 by 6.1%. The
results were 11.4% lower than the year-ago earnings of $2.54 per
share. During full year 2012, the company returned nearly $1.1
billion to its shareholders through share buybacks and payment of
dividend, moderately lower than the 2011 level of $1.14 billion.
Despite the challenging environment, the company seems confident
of posting solid performance. Also, there seems to be a number of
opportunities for the company. Especially, the spin-off of its
Government Services businesses has brought ample opportunities
for growth and profit expansion.
Apart from the spin-off, L-3 Communications' focus on additional
internal consolidations and divestitures in order to lower
overhead costs will allow the company to focus on research and
development and increase efficiency while driving performance and
shareholder value. In particular, the company's diversified
nature of business makes it one of the best-positioned pure
However, loss of key contracts, defense spending cuts and the
lack of near-term catalysts compel us to remain on the sidelines.
Also, order growth and volume increases remain dubious in this
challenging environment. The company presently retains a
short-term Zacks Rank #3 (Hold).
L-3 Communications is not the only stock in the industry that is
focusing on shareholder value. Recently,
General Dynamics Corporation
) raised its quarterly dividend to 42 cents per share versus the
previous payout of 38 cents. Earlier, in Dec 2012,
The Boeing Company
) had also raised its quarterly dividend by 10% to 48.5 cents per
share from the previous payout of 44 cents per share. Meanwhile,
it also announced the resumption of its stock repurchase program
with repurchases expected to come in a band of $1.5 billion and
$2.0 billion in 2013.
Based in New York City, L-3 is a prime contractor in Command,
Control, Communications, Intelligence, Surveillance and
Reconnaissance systems, aircraft modernization and maintenance,
and national security solutions. L-3 is also a leading provider
of a broad range of electronic systems used on military and
commercial platforms. In the near term, we would advise investors
to accumulate its short-term Zacks Rank #2 (Buy) peer
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