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My first purchase (½ position) of Raytheon (NYSE:RTN) was in August 2011 since I considered it to be a Dividend Growth Stock Perfect for Retirees. (data from David Fish's CCC charts and Yahoo Finance) At that time, the yield was 4.23% with a 5-yr dividend growth rate of 10.8% and a P/E of 7.5. I put it on the drip and went on to other stocks. Today, it is a full position and has a yield on my cost of 4.98% and a current yield of 2.48% with a 5-yr dividend growth rate of 13.9%. The P/E today is 15.01 and it just makes the Tweed Factor cutoff at +1.4. I recommended Raytheon in April 2013 in this article Buy Raytheon for Dividend Growth during the Summer Market Pullback.

(click to enlarge)

This stock has had significant capital appreciation this year and is up 57.56% in price. It appears that our government is in a defense buildup and has let many contracts recently to the defense contractors, including Raytheon. Sequestration now appears to be a thing of the past. We live in a risky world and other governments are buying defense items also.

With this in mind, I decided to update my dividend growth study to see how consistent RTN has been. I have produced a spreadsheet with a hypothetical $10,000 invested on 04/03/2009 and reinvested the dividends for 5 years.

StockDate of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
Totals 306.05$2,467.83 46.11
12/30/13$0.55304.19$167.31$90.301.85$27,636.082.44%
09/30/13$0.55302.04$166.12$77.072.16$23,444.272.85%
07/01/13$0.55299.55$164.75$66.102.49$19,964.783.33%
04/01/13$0.55296.73$163.20$57.892.82$17,340.763.80%
12/28/12$0.55293.88$161.63$56.702.85$16,824.453.88%
10/01/12$0.50291.26$145.63$55.582.62$16,333.683.60%
07/02/12$0.50288.68$144.34$55.982.58$16,304.553.57%
04/02/12$0.50285.97$142.98$52.702.71$15,213.353.80%
12/30/11$0.43283.45$121.88$48.382.52$13,834.993.56%
10/03/11$0.43280.39$120.57$39.503.05$11,196.114.35%
RTN07/01/11$0.43278.01$119.54$50.112.39$14,050.523.43%
04/04/11$0.43275.66$118.53$50.462.35$14,028.283.41%
01/03/11$0.38273.43$102.54$46.092.22$12,705.123.25%
10/01/10$0.38271.15$101.68$44.612.28$12,197.903.36%
07/01/10$0.38269.04$100.89$47.732.11$12,942.213.14%
04/01/10$0.38267.28$100.23$56.921.76$15,313.812.64%
12/30/09$0.31265.70$82.37$52.181.58$13,946.672.38%
10/02/09$0.31263.92$81.82$46.011.78$12,224.932.70%
07/02/09$0.31262.03$81.23$43.011.89$11,351.342.88%
04/03/09$0.31259.94$80.58$38.472.09$10,080.473.22%

From the chart it can be seen that the yield has varied between 2.38% and 4.35%. The price has more than doubled over that time with significant growth since September 2013. I have graphed the results so that they can be more easily seen:

(click to enlarge)

Conclusion: Twenty thirteen has seen a powerful bull market with the S&P up nearly 30% year to date. There has been significant increase in the 10 year treasury yield from a low of 1.61% in May to 3%. Consumer spending has picked up this year and it appears to me that the economy is at a transitional point. Defense stocks can be considered a special industrial stock with stable demand. I consider RTN to be in the same sector as Caterpillar (NYSE:CAT) which I also recommended in this article. When dealing with the industrial sector, one must consider cyclicality. Hopefully, RTN is not as cyclical as CAT. I will be buying this stock for my granddaughter's college fund. One should do their own due diligence before investing in anything!

Source: Raytheon: New Contracts Make It A Buy