General Dynamics Cuts Costs, Keeps Dividend Growing
General Dynamics ( GD ) is struggling to boost revenue, but its earnings are stable and the stock is flying high.
The defense contractor is up 27% this year, outperforming the S&P 500's 22% gain. The annual dividend yield is 2.5%, about equal to the S&P 500 average.
The company last boosted its quarterly payout in March, an increase of 5 cents a share, or 9.8%, to 56 cents. That translates to an annual dividend of $2.24 a share.
Like many big caps, General Dynamics' profit and sales growth has been slow but steady, rising for seven-straight years before dipping to $6.57 a share last year. The company's three-year Earnings Stability Factor is 4 on a scale of 0 (most stable) to 99 (least stable).
The earnings stability is due to the company's diversified product lines, which have helped it fend off defense budget cuts. The Falls Church, Va.-based company builds tanks, ships, commercial aircraft and munitions. In recent years, it's made acquisitions to expand into the growing information technology sector that includes surveillance, computing and military command-and-control systems.
In August, General Dynamics was among more than a dozen companies that won part of a $6 billion Homeland Security contract to develop cybersecurity systems.
General Dynamics has pulled back to its 10-week line after clearing an 87.95 flat-base buy point Sept. 16. The pattern formed after the stock broke out above a 70.90 entry in a saucer-with-handle base in April. It's currently testing resistance around 90, its level prior to the economic slump that began in 2008.
Analysts say share buybacks and dividend increases have contributed to the stock's allure.
General Dynamics' Q3 results are due Wednesday. Profit for the quarter is expected to be flat vs. a year earlier at $1.68 a share. Sales are forecast to slip 2% to $7.76 billion.