My purchasing dry spell is finally over!  After a busy finish to 2018, all had been quiet with regard to deploying new capital in 2019.  It wasn’t a result of not wanting to buy anything, and not that I couldn’t find an attractive stock candidate or two, but it was instead the result of not having sufficient capital to invest.

Well, thankfully I was able to round up some cash and make a purchase… my first of 2019!  I didn’t add to an existing Portfolio position, but instead added a new stock to the mix.

That stock belongs to General Dynamics (GD).  GD is an aerospace and defense company headquartered in Virginia (just west of Washington D.C.), but operating worldwide.  In fact, GD has locations in more than 45 countries.  From the company website… “From Gulfstream business jets and combat vehicles to nuclear-powered submarines and communications systems, people around the world depend on our products and services for their safety and security.”  The company operates in 5 different business segments: Aerospace, Mission Systems, Combat Systems, Information Technology, and Marine Systems.  The business is spread out fairly evenly across these segments.

As you may know if you’ve been following my Portfolio Thoughts posts, I’ve been watching GD for several months now.  The stock initially got my attention after it dipped below $190 last summer.  GD stayed on my radar as it moved even lower during the market declines late in 2018.  GD hasn’t participated too much in the market rally to start 2019, however it had moved up about 7.2% since the start of the year prior to my purchase.   While I don’t think GD was a screaming buy at my purchase level, I do feel it was fairly valued.  Sure I would have liked to have made my purchase in early 2019 at a lower price, but I don’t have any reservations about where I initiated my position.

Prior to last year, GD revenues had been approximately flat for the better part of a decade, with EPS growth over that time in the mid single digits.  Large stock buybacks supported that EPS growth.  Over the past year, however, things look to have taken a turn for the better on the revenue and earnings front, and I’m looking for that to continue.

Let’s take a look at the details for my purchase of General Dynamics…

 

GD

On Wednesday, 4/10/19, I purchased 25 shares at $169.15/sh, for a total of $4,228.75.

The purchase was made on the day before the ex-dividend date, so I’ll be able to see my first GD dividend next month.

As previously noted, this is a new position – #43 for the Portfolio.  GD is my 6th Portfolio company in the Industrial sector, but my first in the Aerospace & Defense industry.

GD shares were yielding ~2.41% at my recent purchase price, about 0.27% below my Portfolio average.  However, the yield at the time of my purchase was about as high as GD’s yield has been in the past 5 years.

GD starts out as the #39 ranked stock in my Portfolio by value, so not an oversized position by any measure.  So, I would look to add more shares should the price drop below my initial purchase level.

This purchase results in an additional $102.00 in annual forward dividend income, bringing my Portfolio’s current total to $9,693.73.  I’m creeping up on that $10K mark!

Here’s a look at the dividend growth history for GD, dating back to the year 2000.

The 2012 and 2013 dividends look a bit skewed, as GD moved one of their dividend payments from early 2013 into the last week of 2012.  Thus technically, 2012 saw five dividend payments, with 2013 only seeing three.

Overlooking the payout anomaly, GD has raised their dividend for 28 years in a row, including 2019.  As you can see from the table above, GD picked up the pace of their dividend increases starting in 2004 and have been very consistent since that time.  Dividend raises have been on the order of 10% over most of the measurement periods.

GD already announced a dividend raise for 2019 last month (9.68%).

In addition, the payout ratio is 36.3% based on last year’s earnings of $11.23/share.  This leaves ample room for future dividend increases.  I’d be very happy if GD can continue with 10% dividend raises for years to come.

 

Any thoughts on my GD purchase?  Do you prefer other defense companies, or do you avoid this industry altogether?  I look forward to your comments!