General Dynamics Corporation GD announced that its board of directors has approved a 7.8% hike in its annual dividend. This has taken the annualized payout to $4.40 per share. Notably, the revised quarterly dividend of $1.10 per share will be paid out on May 8 2020, to stockholders on record as of Apr 10.
Dividend Hike & Share Repurchase
The company is increasing annual dividend on a systematic manner. The latest hike will mark the 23rd consecutive annual dividend hike approved by General Dynamics’ board.
The current annualized dividend yield is 2.61% compared with the industry average of 1.05% and Zacks S&P500 composite’s 2.04%. The increase in dividend reflects the company’s stable financial position and systematic growth strategy.
The company also announced the repurchase of an additional 10 million shares of General Dynamics that are issued and outstanding common stock on the open market. The company repurchased 1.1 million of outstanding shares in 2019 and 10.1 million shares in 2018. On Dec 31 2019, 6.4 million shares remained authorized for repurchase, which is nearly 2% of the company’s total shares outstanding.
The company is a major operator in Aerospace – Defense industry and maintains a flexible liquidity position owing to the solid performance. In 2019, the company reported earnings of $11.98 per share, up 6.8% from prior-year quarter’s figures. Moreover, its free cash flow from operations at the end of the fourth quarter was $2,013 million, up 10.3% from $1,824 million in the year-ago quarter.
Can General Dynamics Maintain Dividend Hikes?
During the fourth quarter of 2019, the company witnessed strong order growth, which was in line with its usual trend. Thisboosted its backlog by 28.1% on a year-over-year basis to record-high $86.9 billion. New order intakes, particularly in aerospace and marine, will continue to boost the company’s performance over the long term.
Meanwhile, the proposed fiscal 2020 defense budget includes a spending provision of $205.6 billion for the U.S. Navy, approximately 6% higher than the previous fiscal budget allotment. Increased spending will enable defense contractors to win more contracts. This will allow General Dynamics, as a prime contractor, to generate more revenues.
Dividend Payouts by Other Defense Players
Other companies in the same space, who have raised their dividends recently, include Lockheed Martin Corporation LMT, Northrop Grumman Corporation NOC and L3Harris Technologies Inc. LHX.
In September 2019, the board of directors of Lockheed Martin authorized fourth-quarter dividend of $2.40 per share, up 20 cents from the prior dividend figure. Northrop Grumman's board of directors approved a 10% rise in its quarterly common stock dividend in June 2019. In March 2020, L3Harris Technologies announced that its board of directors has declared a cash dividend on its common stock of 85 cents per share, up 13.3% from the prior payout of 75 cents per share.
Zacks Rank & Price Movement
General Dynamics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Shares of General Dynamics have gained 3.5% in the past 12 months against the industry’s decline of 3.4%.
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