Northrop Grumman Corporation (NOC) raised its quarterly dividend by 9.3% to $0.47 per share from $0.43. This is the seventh consecutive annual increase in its quarterly dividend. The dividend is payable June 12, 2010, to shareholders of record as on June 1, 2010.
Northrop Grumman’s strong balance sheet and free cash flows provide substantial financial flexibility and cushion in matters of incremental dividend, ongoing share repurchase and earnings accretive acquisitions. In fiscal 2009, the company generated $1.4 billion in free cash flows from operations.
The company ended the first quarter of 2010, with a low long-term debt-to-capitalization ratio of 21.4% (Zacks industry average was 93.2%). Total long-term debt was $3.4 billion, along with cash holdings of approximately $2 billion.
Northrop Grumman currently has a high dividend yield of 2.8%. This is higher compared to other large-cap defense companies like, General Dynamics Corporation (GD) and Boeing Company (BA) who have yields of 2.4% and 2.5%, respectively.
Based in Los Angeles, California, Northrop Grumman provides products, services and solutions in information and services, aerospace, electronics and shipbuilding to the military, government and commercial customers in the United States and beyond.
Northrop Grumman’s success in the competitive defense industry depends upon its ability to develop and market its defense-related products and services to the U.S. Government, as well as its ability to provide people, technologies, facilities, equipment and financial capacity needed to deliver those products and services at maximum efficiency.
We believe that Northrop Grumman is fundamentally a sound company and has a strong market position, but we are cautious about near-term bumps. The company currently is trading at a discount to both the peer group and the S&P 500, based on forward earnings estimates.
The positive case for Northrop Grumman stems from revenue growth across the board, broad diversification of programs, strong order bookings and an order backlog of $67.5 billion at the end of first-quarter 2010.
Northrop’s product line is well positioned in high-priority categories such as defense electronics, next-generation ships, unmanned aircraft and missile defense. Revenue and earnings growth continue to be driven by its strong presence in the current focus areas of cyber security, intelligence, surveillance and reconnaissance.
However, we believe all the above positives have already been taken into account. Thus in the near term we maintain our Hold recommendation on the Zacks #3 stock.
Read the full analyst report on “NOC”
Read the full analyst report on “GD”
Read the full analyst report on “BA”
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