Raytheon Company Hikes Dividend 9%, Offers 40% One-Year Total Return (RTN)

The Raytheon Company (NYSE:RTN) announced its 14^th consecutive boost to its annual dividend by hiking its quarterly payout nearly 9% to boost its current yield to 1.63%.

While company’s current yield of 1.63% seems low compared to other industries, this stock is best suited for investors looking for steady asset appreciation with reliable dividend income over the long term. Under those specific conditions, the Raytheon Company delivers results.

The small dividend distribution combined with the share price growth for a total return of more than 40% in the past 12 months. Additionally, the total return rose more than 300% over the past five years.

Investors looking for this combination of share price growth and rising dividend income should perform their own due diligence on Raytheon‘s fundamentals and ensure eligibility for the next round of distributions on the May 10, 2018, pay date by taking a long position before the company’s next ex-dividend date on April 10, 2018.

The Raytheon Company (NYSE:RTN)

Headquartered in Waltham, Massachusetts, and founded in 1922, the Raytheon Company develops integrated products, services and solutions for defense and other government markets worldwide. The company operates through five segments – Integrated Defense Systems (IDS), Intelligence, Information and Services (IIS), Missile Systems (MS), Space and Airborne Systems (SAS) and Forcepoint.

The IDS segment provides integrated air and missile defense, land and sea-based radar solutions, as well as naval combat and ship electronic systems. The IIS segment offers a range of technical and professional services, such as intelligence, surveillance and reconnaissance, analytics, logistics, mission support, engineering and air traffic management systems. The MS segment develops and supports a range of weapon systems, including missiles, smart munitions, kinetic kill vehicles and combat sensor solutions. The SAS segment provides airborne radars for surveillance and fire control applications, lasers, precision guidance systems and electronic warfare systems. Lastly, the Forcepoint segment develops cyber security products comprising data loss prevention systems, firewall technology and email security products.

The company’s most recent quarterly dividend hike was an 8.8% boost from $0.7975 in the previous period to the current $0.8675 dividend payout per share. This new quarterly payout converts to a $3.47 annualized distribution amount and a 1.63% yield. Because the share price rose nearly 40% over the past year, the company’s current yield is approximately 19% below its own five-year average yield.

While not as high as average yields in some other sectors, Raytheon’s current yield is identical to the average yield of the overall Industrial Goods sector. Furthermore, the company’s current yield is more than twice the simple average yield of all the companies in the Major Diversified Aerospace & Defense market segment. In a more equitable comparison that excludes all companies that do not pay any dividends, Raytheon’s 1.63 yield is nearly 19% above the 1.37% average yield of only dividend-paying companies in the segment.

What Raytheon’s dividend lacks in high yield, it makes up in steady dividend hikes and a reliable income flow. The company failed to raise its annual dividend only twice in the past two decades. Raytheon paid an $0.80 annual dividend in 1997 and then suspended its dividend distributions for the next three years. The company resumed paying dividends in 2001 and was back to the $0.80 annual dividend by 2002, which it also paid in 2003 and 2004.

However, since resuming annual dividend hikes in 2005, the company boosted its annual dividend at an average rate of 11% per year for the past 14 consecutive years. Over that period, the total annual dividend amount rose more than 330%.

The company’s share price hit its 52-week bottom approximately two weeks into the trailing 12 months and closed on April 5, 2017 at $149.95. After bottoming out in early April the share price advanced almost 47% before it reached its new 52-week high of $219.86 on February 26, 2018, which was the highest price level in nearly eight years.

After peaking at the end of February 2018, the share price bounced of the $220 resistance level and pulled back 5.2%. However, the share price recovered 45% of those losses in just one week and closed on March 21, 2018, at $213.48. This closing price was 39.4% higher than it was one year earlier, 42.2% above the 52-week low from early April 2017 and more than 260% higher than it was five years earlier.

The asset appreciation was the main driver that resulted in a 41.6% total return over the past 12 months. Additionally, the share price growth and the increasing dividend income combined for total returns of 98% and 301% over the past three and five years, respectively.

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