Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
General Dynamics in Focus
General Dynamics (GD) is headquartered in Falls Church, and is in the Aerospace sector. The stock has seen a price change of 10.42% since the start of the year. Currently paying a dividend of $1.02 per share, the company has a dividend yield of 2.35%. In comparison, the Aerospace - Defense industry's yield is 1.02%, while the S&P 500's yield is 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.08 is up 12.4% from last year. Over the last 5 years, General Dynamics has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.18%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. General Dynamics's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
GD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $11.76 per share, which represents a year-over-year growth rate of 4.81%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, GD is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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General Dynamics Corporation (GD) : Free Stock Analysis Report
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