General Dynamics
is a leading defense contractor supplying products and technology to marine
systems, combat systems, information systems and aerospace (basically
submarines, tanks, aircraft and command and control systems). The company has
grown earnings and dividends 11% and 13% respectively over the last 10 years
and has earned a consistently high 17-18% return on equity. GD should be able to continue to match that
record because of:
(1) growth in
commercial aerospace division,
(2)
acquisitions,
(3) an
aggressive cost reduction program,
(4) share
repurchases.
Negatives:
(1) a large percentage of its sales are
dependent on government spending both in the US and Europe ,
(2) its backlog has declined recently.
GD has a debt to
equity ratio of approximately 24%, is rated A++ by Value Line and its stock
provides a yield of 2.5%.
Statistical Summary
Stock Dividend Payout
# Increases
Yield Growth Rate Ratio Since 2004
GD 2.5% 6% 32% 10
Ind Ave 1.8
9* 26 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2004 Margin Rating
GD 24% 18% 1 8% A++
Ind Ave 40 16 NA 8 NA
*many companies in GD’s industry
don’t pay a dividend
Chart
Note:
GD stock made good initial progress off its March 2009 low, quickly surpassing
the downtrend off its September 2008 high (straight red line) and the November
2008 trading high (green line). It then
traded in a range for approximately three years before resuming a sharp
uptrend. Long term, it is in an uptrend
(blue lines). Intermediate term, it is in
an uptrend (purple lines). Short term,
it is in an uptrend (brown line). The
wiggly red line is the 50 day moving average.
The Dividend Growth Portfolio owns a 75% position in GD. The upper boundary of its Buy Value Range is
$58; the lower boundary of its Sell Half Range is $138.
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