PPA has dramatically underperformed the broader market. Using expected earnings-per-share for the year, the payout ratio is just 2.1%. If shares were to trade at our target P/E ratio of 16 by 2024, then valuation would be a 5.7% headwind to annual returns. Therefore, total returns would consist of the following: General Dynamics is expected to return 5.6% annually over the next half decade. Investopedia requires writers to use primary sources to support their work. We maintain our hold recommendation on shares of L3Harris. For every share of L3 Technologies that they owned, shareholders received 1.30 shares of Harris Corporation. Revenue improved 8.3% to $2.2 billion. This was $54 million above estimates. If the stock were to revert to this average by 2024, the corresponding multiple contraction would be a 1.4% headwind to total annual returns. Based on the current share price of $199 and the revised midpoint for earnings-per-share guidance for the year, Raytheon trades with a multiple of 17.2x earnings. Using the expected midpoint for earnings-per-share for the year of $21, Lockheed Martin stock trades with a P/E ratio of 18.3. These are the best dividend stocks for 2021. Is there more room for these stocks to run going forward? The company has increased its dividend at an annual average of 6.2% over the last 10 years. Huntington Ingalls has increased its dividend every year since 2012. The company had nearly $54 billion in sales in 2018, with the U.S. Department of Defense contributing 60% of this total. Textron reported second quarter earnings results on 7/17/2019. Communication Systems tactical orders grew 23% due to strength in both U.S. and international demand for modernized products. Northrop Grumman Corp. "Northrop Grumman to Sell Federal IT and Mission Support Business to Veritas Capital for $3.4 Billion." We do not believe that the company will grow its dividend in the coming years. Missiles and Fire Control operations create missile defense systems, while the Space Systems segment produces satellites. General Dynamics raised its guidance range for 2019 earnings-per-share to $11.85 to $11.90 from $11.60 to $11.70. General Dynamics Corp. "General Dynamics Electric Boat awarded $9.5 billion by U.S. Navy for Columbia-class submarines." Huntington Ingalls builds nuclear and non-nuclear ships for the U.S. Department of Defense. The company reduced its share count at an annual rate of 5.7% from 2009 through 2018. While the companyâs expected growth rate is tied for the highest on this list, we find that the stockâs valuation has gotten ahead of itself. This is the highest valuation of all of the companies on this list. The deal is expected to close after the Otis and CCS spin-offs in the first half of 2020. The company was spun off in March of that year. The company compounded earnings at a rate of 6.1% over the last decade. General Dynamics has increased its dividend for 28 years in a row, giving the company the longest dividend growth streak on this list. Up until 2011, Huntington Ingalls Industries was a division within Northrop Grumman. Expected total annual returns would consist of the following: In total, United Technologies is forecasted to return just 2.7% per year through 2024. Aerospace sales improved 12.7% as the company delivered 31 Gulf Stream jets in the second quarter compared to 26 deliveries a year ago. Huntington Ingallsâ annualized dividend is $3.44. This latest increase is slightly below the 10-year average increase of 11%. Growth in sensors for the Apache helicopters also aided sales growth. The company now expects earnings-per-share of $7.90 to $8.05 for 2019, up from $7.80 to $8.00 previously. Over the last decade, the dividend has climbed at an annual rate of 10.6%. Textron is a diversified aerospace, defense and industrial conglomerate. The most trusted of all are the famous Dividend Aristocrats, which are a few dozen high-profile stocks on the S&P 500 that have increased their dividends every year for at least … The annualized dividend of $5.28 represents a payout ratio of just 27% of the midpoint for expected earnings-per-share for 2019. A defensive stock is one that provides a consistent dividend and stable earnings regardless of the state of the overall stock market or economy. Earnings-per-share for the year are expected in a range of $3.65 and $3.85, and we expect earnings to grow at 8% annually over the next five years. Using the current share price of $138 and expected earnings-per-share of $7.98, the stock trades with a P/E ratio of 17.3. The Otis segment had 4% organic sales growth. Flight and defense systems saw an uptick in demand. Maxar Technologies Reports Third Quarter 2020 Results, General Dynamics Electric Boat awarded $9.5 billion by U.S. Navy for Columbia-class submarines, Northrop Grumman to Sell Federal IT and Mission Support Business to Veritas Capital for $3.4 Billion, Axon Reports Q3 2020 Revenue Growth of 27%, ARR Tops $200 million, Up 44%. Lockheed Martin StockLockheed Martin (LMT) is the biggest defense contractor and briefly … Higher net sales for the international Patriot program was the primary driver of growth. We anticipate earnings growth of 5% annually through 2024. You can view all 57 Dividend Aristocrats here. Each segment contributed to the decline. As mentioned previously, Raytheon and United Technologies have entered a merger agreement. We feel 14x earnings is more appropriate as this is closer to the stockâs 10-year average valuation. Lastly, accounting for divestitures, Industrial sales were lower by 8.4% to decreased volumes. Another area of strength was the Space division, which grew sales by 11% on higher revenue from government satellite and strategic and missile defense programs. We feel that investors are better off investing elsewhere in the defense sector and rate shares of the company as a sell. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is overseen by a professional money manager. There seems to be a trend here. The annualized dividend of $4.08 is slated to consume just 34% of expected earnings-per-share for the year. Public Safety orders improved 30% last quarter. The industry provides security and defense solutions primarily for the U.S. military, but also for law enforcement agencies and foreign governments. General Dynamics operates four business divisions: Aerospace, which produces the high-end Gulf Stream private jet; Combat Systems, which makes combat vehicles like the Abrams battle tank; Information Systems & Technology, which provides fire-control systems for ships as well as programs for cyber security; Marine Systems, which manufacturers ships and submarines for the Navy; and Mission Systems, which produces programs used in Space, Intelligence and Cyber Systems. The two companies are projected to generate $74 billion in sales in 2019 and will capture more than $1 billion in gross annual run-rate cost synergies by year four after closing. The share count was 41.7 million at the end of the most recent quarter, down from 49.4 million shares in 2011. The stock has a current yield of 1.9% and the annualized dividend of $3.77 would consume just 33% of expected earnings for the year. The majority of L3Harrisâ sales come from the U.S. government and other defense contractors. Shares yield 2.1% at the moment. This is above our target P/E ratio of 16. We rate shares as a hold, but would recommend Lockheed Martin as a buy if the stock were to pullback from current levels to push its expected returns closer to 10%. Following the merger, Raytheon Technologies Corporation will be the third largest commercial company and the second largest provider of defense products in the world. Lockheed Martin has increased its dividend for 16 consecutive years. The stock has a current market capitalization of $46 billion. Revenue grew 18.8% to $8.5 billion, which was $40 million above estimates. While the stock has one of the highest dividend yields on this list, it also has one of the lowest earnings growth rates. The combined company will be named Raytheon Technologies Corporation and will exclude United Technologiesâ upcoming spin offs of Otis and Carrier. Huntington Ingalls has a stock price of $218. Sector: Consumer defensive Consecutive annual dividend increases: 44 Dividend yield: 2.3%. All four divisions within the company reported growth. The company earned $3.07 per share, which was $0.48 below estimates and a 43% drop from the prior year. Source: Second Quarter Results Presentation, slide 2. In 2015, the company purchased Sikorsky Aircraft, which produces Black Hawk helicopters, from United Technologies for $9 billion. Northrop Grumman released second quarter earnings results on 7/24/2019. Revenue was higher by 4% to $9.6 billion. We anticipate 3% annual growth through 2024. The Aerospace & Defense ETF (ITA) has returned more than 31% year-to-date and more than 105% over the past five years. Lower revenues in the Legend-class cutter program and amphibious assault ships were the reasons for this weakness. When the economy and the market starts heading south, many investors start buying dividend growth stocks.They have long been considered a defensive position in turbulent times. The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Raytheon reported second quarter results on 7/25/2019. We feel a 2024 target P/E ratio of 15 is appropriate, given the strength of the business and the Orbital ATK purchase. The Electronic Systems segment had 14% growth, as all three businesses saw increase in demand. The stock trades with a market capitalization of $109 billion. Accessed Dec. 7, 2020. "Financial Data." The company also received a $270 million award for missile compartment work under joint development with the U.K. Royal Navy. Huntington Ingalls released second quarter earnings results on 8/1/2019. The defense industry provides modern weaponry, combat vehicles, ships, and fighter jets. Huntington Ingalls is composed of three segments: Newport News Shipbuilding â which builds nuclear powered aircraft carriers and submarines, Ingalls Shipbuilding – which produces surface combat ships, amphibious assault ships and Coast Guard cutters, and Technical Solutions â which provides fleet maintenance, modernization, IT support, nuclear management and operations, and oil and gas engineering. This division had a book-to-bill ratio of 1.2x and a 6% increase in backlog. Investors holding shares of United Technologies will own approximately 57% of the combined company while legacy Raytheon shareholders will own approximately 43% of the combined company. The first was a $495 million contract for a Columbia-class development and industrial base from the U.S. government. This article will look at the top 8 stocks in the aerospace and defense sector according to the Sure Analysis Research Database. Lockheed Martin earned $5.00 per share, which topped estimates by $0.26 and represented 23.4% growth from the previous year. In addition to dividends, Northrop Grumman has returned a tremendous amount of capital to shareholders in the form of stock buybacks. The merger of Raytheon and United Technologies is expected to take place following these previously announced spin offs in the first half of 2020. It has provided a total return of 0.6% over the past 12 months, well below the Russell 1000's total return of 23.2%.ï»¿ï»¿ These performance figures and all statistics in the tables below are as of December 4. The company has a high expected growth rate and has a long history of returning capital to shareholders through dividends and buybacks. Click to skip ahead and see the 5 Best Dividend Stocks Under $20. This defensive stock offers a quarterly dividend of $0.13 per share, which represents a modest 1.4% yield. This segment saw higher revenues due to increased volumes for aircraft carriers and naval nuclear support services which were offset by lower submarine revenues. Some defense companies have experienced delays and disruptions due to the impact of the COVID-19 pandemic. The company has increased its dividend with a compound annual growth rate of 11.6% over the past five years. This is the second consecutive quarter that the company has increased its guidance for 2019. Shares yield just 0.2%, the lowest yield on this list. L3Harris expects earnings-per-share of $9.60 to $9.70 for the year. Combined with stronger worldwide demand for defense products, Lockheed Martin could grow earnings-per-share by at least 8% annually over the next five years. In my monthly series of 10 Dividend Growth Stocks, I rank a selection of dividend growth (DG) stocks in Dividend Radar and present the 10 top-ranked stocks for consideration. Through efficiency, operating margins increased 120 bps to 10.5% and the company spent $159 million on share repurchases during the quarter. United Technologies reported second quarter earnings results on 7/23/2019. Lockheed Martin expects to generate EPS in a range of $20.85 and $21.15 for the year. Defensive buys are investments deemed to be lower risk, by virtue of lower correlations to economic cycles. General Dynamics has a current market cap of $55 billion and produced more than $36 billion in sales last year. Textron, Inc. The company increased earnings at a rate of 7.6% over the last 10 years. Consistent with this, General Dynamics raised its dividend 9.7% for the May 2019 payment. Meanwhile, Intelligence, Information & Services saw a 5% increase in sales, mostly due to higher volumes of classified programs in the areas of cyber and space. Ingalls Shipbuilding had a 1.1% drop in revenues and a 14% decline in operating income. The company earned $2.20 per share, topping estimates by $0.15 and growing nearly 11.7% from the prior yearâs second quarter. The company has four components: Integrated Mission Systems, Communication Systems, Space & Airborne Systems and Aviation Systems. A higher effective income tax rate compared to the second quarter of 2018 also factored in the EPS decline. The low end for organic sales growth was also increased. The stock currently offers a 2.2% yield. Marine Systems sales grew 7.2%. Using the midpoint of guidance for the year of $11.88, the stock has a current P/E ratio of 16. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This increase was slightly over the five-year average annual raise of 8.4%. Radars and restricted programs were the primary contributors to this growth. Shares of QUALCOMM, ResMed, Starbucks, Texas Instruments, and UnitedHealth represent a potential buying opportunity for the long-term … Aerospace sales were higher by 2% due to increased volumes for manned aircraft and space programs. Under the merger agreement, legacy Raytheon shareholders will receive 2.3348 shares in the combined company. Given these investors defensive stance, one might ask how about some real defense stocks, as in the Aerospace and Defense … Textron raised both the low- and high-end ranges of its EPS guidance by $0.10. Newport News Shipbuilding had revenue growth of 7.1%, but suffered a 23% decrease in operating income. Reverting to our target P/E ratio of 15.3 by 2024 would reduce returns by 2.4% each year over this period of time. Pro forma sales for 2019 are expected to be ~$74 billion. Northrop Grumman was founded as Northrop Aircraft in 1939. As 2020 began, it looked as if the long era of rock-bottom rates might finally come to an end. 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