generic General Dynamics (NYSE:GD) Is Increasing Its Dividend To US$1.26
The board of General Dynamics Corporation (NYSE:GD) has announced that the dividend on 6th of May will be increased to US$1.26, which will be 5.9% higher than last year. Based on the announced payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.
View our latest analysis for General Dynamics
General Dynamics' Earnings Easily Cover the Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, General Dynamics' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 3.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
General Dynamics Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$1.88 in 2012, and the most recent fiscal year payment was US$4.76. This works out to be a compound annual growth rate (CAGR) of approximately 9.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that General Dynamics has grown earnings per share at 6.0% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
General Dynamics Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that General Dynamics is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for General Dynamics that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
