Raytheon a proven dividend payer

The fourth Thursday in January is nearly always a big day for investors of Merrimack Valley securities. That’s because it’s the day that fourth-quarter and year-end earnings are released for many prominent (and less prominent) companies.

Today, let’s look at Raytheon Co. The global defense contractor is a well-known entity in the investment world, and thus doesn’t fit with this blog’s overall theme. But it’s such a key company in the region, employing thousands at its Integrated Defense Systems headquarters on Apple Hill Road in Tewksbury, several thousand more at its Air Defense Center in Andover and an unknown number at facility for another of its divisions in Billerica. Raytheon is pretty coy about employment counts (the overall number is slowly shrinking over time) but a good ballpark figure for the Merrimack Valley might be something along the lines of 6,000. No other public company comes close.

On Thursday morning, Raytheon reported a  fourth-quarter profit of $544 million, or $1.84 per share. Quarterly revenues totaled $6.24 billion, with earnings, adjusted for non-recurring costs, at $1.88 per share.

Long-story short, profits beat expectations calling for $1.86 per share (based on The Associated Press’ citing an average estimate of nine analysts surveyed by Zacks Investment Research) but missed the revenue forecast of $6.51 billion.

Shares were trimmed nearly 3 percent on Thursday, falling $3.97 to close at $142.90. But by 10 a.m. today they had recovered all of that. Shares have risen about 24 percent in the past year, significantly outperforming most indexes.

Raytheon has had a wonderful run over the past decade, but headwinds may finally be the order of the day, at least in terms of capital gains. But investors have also enjoyed steady dividend growth, which in my opinion has been the best reason to invest in this security — I did a blog about this nine months ago (http://bit.ly/1pBrYDb) when I was at The Sun, and to sum it up, Raytheon’s annual dividend has increased from 80 cents per share 12 years ago to $2.93 per share last year. It rarely increases the payout by less than 10 percent each year, and will likely do so again in March.

And over time, this is a big deal.  

To be clear, Raytheon is not growing, in terms of revenue (It’s been between $23 billion and $25 billion for several years now) or in terms of headcount. But it has found a way to steadily increase profits, and with that, dividends.  

This year Raytheon expects full-year earnings to be $7.20 to $7.35 per share, with revenue in the range of $24.8 billion to $25.3 billion. That puts its share price at about 20 times this year’s earnings, which is a little rich. But for long-term dividend growth, Raytheon is a proven commodity.


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