A few days after its fourth quarter earnings release, L-3 Communications Holdings Inc. ( LLL - Analyst Report ) has increased its dividend as well as announced a new share repurchase program. The company focuses on program execution, operational efficiency and disciplined cash deployment which make incremental dividend payouts feasible lending increasing value to shareholders.

L-3 Communications has increased its quarterly dividend by 10%, bringing the annualized dividend to $2.20 per share from the previous payout of $2.00 per share. Following the hike, the company will now pay a quarterly dividend of 55 cents as against the 50 cents paid earlier. The said dividend will be paid on Mar 15, 2013, to shareholders of record as of the close of business on Mar 1, 2013.

This is the company’s ninth consecutive annual dividend increase. Last February, the company had increased the quarterly dividend by 11% to 50 cents per share.

As per the new share repurchase program, the company is permitted to repurchase up to an additional $1.5 billion of the company’s common stock through Jun 30, 2015. This is the company’s sixth repurchase program and is effective immediately. The company plans to fund the program from its cash on hand and cash generated from operations.

Recently, L-3 Communications Holdings reported its fourth quarter 2012 financial results with earnings per share of $2.25 surpassing the Zacks Consensus Estimate of $2.12 by 6.1%. The results were 11.4% lower than the year-ago earnings of $2.54 per share. During full year 2012, the company returned nearly $1.1 billion to its shareholders through share buybacks and payment of dividend, moderately lower than the 2011 level of $1.14 billion.

Despite the challenging environment, the company seems confident of posting solid performance. Also, there seems to be a number of opportunities for the company. Especially, the spin-off of its Government Services businesses has brought ample opportunities for growth and profit expansion.

Apart from the spin-off, L-3 Communications’ focus on additional internal consolidations and divestitures in order to lower overhead costs will allow the company to focus on research and development and increase efficiency while driving performance and shareholder value. In particular, the company’s diversified nature of business makes it one of the best-positioned pure defense players.

However, loss of key contracts, defense spending cuts and the lack of near-term catalysts compel us to remain on the sidelines. Also, order growth and volume increases remain dubious in this challenging environment. The company presently retains a short-term Zacks Rank #3 (Hold).

L-3 Communications is not the only stock in the industry that is focusing on shareholder value. Recently, General Dynamics Corporation ( GD - Analyst Report ) raised its quarterly dividend to 42 cents per share versus the previous payout of 38 cents. Earlier, in Dec 2012, The Boeing Company ( BA - Analyst Report ) had also raised its quarterly dividend by 10% to 48.5 cents per share from the previous payout of 44 cents per share. Meanwhile, it also announced the resumption of its stock repurchase program with repurchases expected to come in a band of $1.5 billion and $2.0 billion in 2013.

Based in New York City, L-3 is a prime contractor in Command, Control, Communications, Intelligence, Surveillance and Reconnaissance systems, aircraft modernization and maintenance, and national security solutions. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms. In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer FLIR Systems, Inc. ( FLIR - Analyst Report ) .