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General Dynamics (GD) Announces 10.7% Increase in Dividend

Zacks Equity Research
Updated

General Dynamics Corporation GD board of directors approved a 10.7% hike in quarterly common stock dividend. This takes the annualized payout to $3.72 per share.

Dividend Hike

The company will pay a dividend of 93 cents per share compared with the prior payment of 84 cents. The hiked dividend will be paid on May11 to shareholders on record as of Apr 13.

Raising dividend annually has been a regular practice for this defense major. The latest hike marks the 21st consecutive annual dividend hike.

The current annualized dividend yield is 1.64% compared with the industry average of 0.89%. The increase in distributable income indicates the company’s profitably implemented investment growth strategy.

General Dynamic’s Financials

General Dynamics strives to maintain a flexible liquidity position. As of Dec 31, 2017, General Dynamics’ cash and cash equivalents were $2,983 million, up 27.8% year over year. In 2017, the company’s cash inflow from operating activities was around $3,879 million, up 76.5%. Free cash inflow from operations in 2017 was $3,451 million, up 91.1%.

We believe strong performance of its diverse defense offerings has given General Dynamics the financial flexibility to pay incremental dividends. Undoubtedly, this will attract more investors to spend money in
the company’s shares.

Moreover, last month the company acquired CSRA — a premier provider of high-tech IT solutions for $9.6 billion. With increasing demand for cybersecurity solution across the globe, this has been a significant step adopted by General Dynamics to enhance its footprint in the cybersecurity market.

This buyout enables General Dynamics to offer cost-effective IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies which in turn will push up its profit margin.

We believe that the company’s strong cash flow and organic growth, along with its inorganic strategies like the CSRA purchase will help generate sufficient funds to meet its financial commitments, apart from awarding shareholders through lucrative dividend payouts.

Price Movement

General Dynamics’s stock has rallied about 13.4% in the last three months, compared with the broader industry’s gain of 15.7%. The underperformance may have been caused by the 2017 Tax Cuts and Jobs
Act that had an adverse impact on the company's financials.

 



Zacks Rank & Other Stocks to Consider

General Dynamics carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the same sector are Boeing Co. BA, Huntington Ingalls HII and Spirit Aerosystems SPR, each of them sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing recorded an average positive earnings surprise of 20.69% in the last four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings has risen by 27% to $14.05 in the last 90 days.

Huntington Ingalls delivered an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings has risen by 43.75% to $17.38 in the last 90 days.

Spirit Aerosystems has an average positive earnings surprise of 9.76% for the last four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings rose by 14.96% to $6.30 in the last 90 days.

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