Northrop Grumman (NOC) Approves 8% Hike in Dividend Payout
Northrop Grumman Corporation NOC recently announced that its board of directors has approved a 8.3% hike in its quarterly common stock dividend. As a result, the annualized payout has increased to $6.28 per share from the prior $5.80.
The new quarterly dividend of $1.57 per share is up by 12 cents from the earlier quarterly dividend of $1.45. The raised dividend will be paid on Jun 16, 2021, to shareholders of record at the close of business on Jun 1.
Consistent Dividend Hikes
It is imperative to mention that Northrop’s management has been sanctioning annual dividend hikes for more than a decade now. The current dividend revision marked the 19th consecutive annual raise by the company.
Post the dividend hike, Northrop Grumman’s annualized dividend yield is1.70%, based on the stock’s price as of May 18, compared with the industry’s average of 0.06%. This rise in distributable income reflects the company’s strong balance sheet and a steady cash flow position, which provides it with financial flexibility and allows incremental dividend.
What Drives Northrop?
Northrop Grumman has been committed to delivering higher returns to shareholders through increased dividend payouts and efficient share repurchase strategy.
A constant flow of contracts enables it to maintain this strategy, as contract wins boost the defense major’s balance sheet, which in turn allows it to maintain steady dividend hikes. Evidently Northrop Grumman’s cash and cash equivalents were $3.52 billion at the end of the first quarter of 2021, compared with $3.28 billion at the end of first-quarter 2020. This must have enabled the company to pay dividends worth $238 million in the first quarter of 2021, up 4.8% from the dividend paid in the year-ago quarter.
With the company being one of the primary defense contractors in the United States, we expect the company to follow a similar trend of dividend hikes in the coming days.
Meanwhile, effective Jan 30, 2021, Northrop completed the IT services divestiture for $3.4 billion in cash. The majority of sales proceeds from this transaction was used in the first quarter of 2021 for a $2 billion accelerated share repurchase. At a time when every entity is looking to preserve liquidity amid uncertainties due to the COVID-19 outbreak, such dividend hikes and share repurchases from Northrop Grumman should boost investors’ confidence in this stock.
Dividend Hikes in the Same Space
Northrop Grumman is not the only company in the U.S. defense space to reward shareholders with a dividend hike.
For instance, in May 2021, Curtiss-Wright Corporation CW announced that its board of directors has approved a 6% increase in its quarterly dividend to 18 cents per share from 17 cents paid out in first-quarter 2021
Earlier in April, Raytheon Technologies RTX announced that its board of directors declared a dividend hike of 7%, which brought its current dividend payout to 51 cents per share.
In March, General Dynamics GD announced that the board of directors has approved an 8.2% hike in annual dividend, which increased the annualized payout to $4.76 per share.
Shares of Northrop Grumman have gained 20.9% year to date, outperforming the industry’s 13.1% growth.
Northrop Grumman currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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