6 Large-Cap Aerospace and Defense Contractors

Includes: BA, GD, GR, HON, LMT, RTN
by: Zvi Bar
Aerospace and defense manufacturers are usually considered conservative investments. These companies generally do business with governments and enormous private companies, usually through multi-year contracts. Additionally, these companies have a history of growing their businesses and raising prices at a rate above inflation.
Below are the current yields and 2011-to-date performances for six large-cap American aerospace and/or defense product and services manufacturers that are traded in the U.S., along with their five-year dividend payout performances.
1. Boeing Co. (NYSE:BA)
  • Current yield: 2.3%
  • 2011-to-date performance: 11.63%

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2. General Dynamics Corp. (NYSE:GD)
  • Current yield: 2.7%
  • 2011-to-date performance: 0.39%
3. Goodrich Corp. (NYSE:GR)
  • Current yield: 1.2%
  • 2011-to-date performance: 11.07%
4. Honeywell International Inc. (NYSE:HON)
  • Current yield: 2.3%
  • 2011-to-date performance: 6.25%
5. Lockheed Martin Corp. (NYSE:LMT)
  • Current yield: 3.8%
  • 2011-to-date performance: 13.8%
6. Raytheon Co. (NYSE:RTN)
  • Current yield: 3.8%
  • 2011-to-date performance: 1.86%
Beyond these companies, other large cap domestic players exist in the aerospace and defense worlds, such as Northrop Grumman (NYSE:NOC). Additionally, General Electric (NYSE:GE) and United Technologies (NYSE:UTX) are two of the primary manufacturers of jet engines and many other products that are purchased for aerospace and/or military purposes.
Not counting their dividends, all of the above-mentioned companies are flat to up so far within 2011, with half of them (BA, GR and LMT) up over 10% so far within 2011. Lockheed Martin is not only up 13.8% so far in 2011, but its annual dividend payout has grown from $1.25 in 2006 to an estimated $3.00 this year. See its 2011-to-date performance below:

While it is true that there are significant concerns over the future defense budgets for the United States and the combined European block, many of these companies have survived prior bouts of reduced government spending. Indeed, these businesses are known to be cyclical. Additionally, several nations may soon attempt to take the lead that the U.S. enacted in modernizing its planes to the automated, non-manned versions that are starting to proliferate. Moreover, future technological advancements will undoubtedly require future upgrading.
Disclosure: I am long GE.