General Dynamics Offers Shareholders 10% Quarterly Dividend Boost (GD)

General Dynamics Corporation (NYSE:GD) extended its streak of consecutive annual dividend hikes to more than two decades by offering its shareholders a quarterly dividend boost of nearly 10% for the next round of dividend payouts.

In addition to its current quarterly dividend boost, General Dynamics has been rewarding its shareholders with dividend distributions for the past four decades and has hiked its annual dividend amount for the last 21 consecutive years. Investors should not be too concerned about the future of dividend distributions. General Dynamics’ current dividend payout ratio of 33% indicates that the company currently uses just one-third of its earnings to cover dividend payouts. Furthermore, the company managed to maintain an average payout ratio of 32% over the past five years.

Investors generally consider the 30% to 50% payout ratio range to be sustainable. Therefore, barring any unforeseen circumstances, General Dynamics should be able to maintain its dividend payouts, as well as offer at least one quarterly dividend boost per year for the near future. General Dynamics scheduled its next dividend pay date for May 10, 2019. On that date, the company will distribute dividend payments to all shareholders of record prior to the April 11, ex-dividend date.

General Dynamics Corporation (NYSE:GD)

Headquartered in Falls Church, Virginia, and incorporated in 1952, the General Dynamics Corporation operates as an aerospace and defense company through five business segments. The Aerospace segment designs, manufactures and supports business-jet aircraft — primarily under the Gulfstream brand — and offers various support services for business-aviation. Additionally, the company’s Combat Systems segment designs, develops and manufactures combat vehicles, weapons systems and munitions. Furthermore, this segment offers wheeled combat and tactical vehicles, battle tanks, tracked combat vehicles and armaments, as well as maintenance, logistics support and sustainment services. The Information Technology business segment provides technology infrastructure and professional services. This segment’s offerings include software development and systems engineering, as well as data analytics services and solutions. Additionally, the Mission Systems segment offers mission-critical Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) products and systems. Products in the C4ISR category include electronics and cyber systems and products for intelligence gathering and space exploration, as well as naval and air force applications. The Marine Systems segment designs and builds nuclear-powered submarines and surface combat vessels, as well as auxiliary and combat-logistics ships for the U.S. Navy and Jones Act ships for commercial customers.

The company’s current 9.7% quarterly dividend boost increased the payout amount from $0.93 in the previous period to the current $1.02 distribution amount. After this quarterly dividend boost, the new payout amount corresponds to a $4.08 annualized dividend distribution and a 2.4% forward dividend yield.

Driven by the share price pullback since January 2018, as well as the rising dividend distributions, General Dynamics’ current yield is 29% higher than the company’s own 1.9% average dividend yields over the past five years. In addition to outperforming its own five-year dividend yield average, General Dynamics also outpaced in terms of dividend yield all but one of its peers — Lockheed Martin (NYSE:LMT) — in the Aerospace & Defense industry segment.

As the second highest yield in the segment, General Dynamics’ current 2.4% yield is more than 170% above the 0.88% simple average yield of all companies in the Aerospace & Defense segment. Even limiting the average yield calculation to only the segment’s dividend-paying companies increases the average yield to just 1.32%. Therefore, General Dynamics’ current yield is still more than 80% above the average yield of the segment’s only dividend-paying equities. Furthermore, the GD’s current yield is also nearly twice the 1.21% simple average yield of the entire Industrial Goods sector.

The company’s current quarterly dividend boost is just the most recent in a string of 21 consecutive annual dividend hikes. Over the past two decades, the company enhanced its total annual dividend payout amount 750%. This degree of advancement corresponds to an average annual growth rate of 11.3% per year. While growth rates tend to diminish over time, GD’s recent growth is only slightly behind with a 10.7% average growth rate over the past five years.

The share price decline in 2018 overpowered the rising dividend distributions and General Dynamics delivered a 20% total loss over the past 12 months. However, a continuation of the current share price uptrend could bring total returns back to the levels that the company managed to deliver just a few years ago. The company rewarded its shareholders with a total return of 36% over the past three years. Over the past five years, shareholders enjoyed an even higher total returns rate of nearly 70%.

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