Raytheon Boosts Shareholder Return

Raytheon Company ( RTN - Analyst Report ) has increased its dividend by 16%, bringing the annualized dividend to $2 per share from the previous payout of $1.72 per share. The 28 cent increase in the annual dividend reflects the company’s focus on capital deployment and its commitment to shareholders.

The company will now pay a quarterly dividend of 50 cents per share compared with the prior quarterly dividend of 43 cents per share. The hiked dividend will be paid on May 3, 2012, to shareholders of record at the close of business on April 4, 2012.

With this the company has increased the dividend for the eighth consecutive year. In March 2011, the company had increased its quarterly dividend by 15% to 43 cents.

Raytheon adopts a balanced capital deployment strategy that helps in growing its business, including capital expenditures, acquisitions, and research and development while prudently managing the balance sheet and returning cash to stockholders through dividend payments and share repurchases. At the end of 2011, cash and cash equivalents were $4 billion compared with $3.6 billion in 2010. Going forward, the company believes that all its financing resources would be sufficient enough to meet its capital expenditure, investment, debt service and other financing requirements.

Raytheon is one of the best-positioned companies as it enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow, operational improvements. Revenue and earnings growth continue to be driven by a strong presence in the areas of Intelligence, Surveillance and Reconnaissance, air & missile defense systems, border security, air traffic management, training and homeland security and cyber security.

These positives are, however, offset by apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

In December last year, Raytheon's peer The Boeing Company ( BA - Analyst Report ) also increased the quarterly dividend to 44 cents versus its previous payout of 42 cents per share.