General Dynamics Boosts Dividend

General Dynamics Corporation ( GD - Analyst Report ) has increased its dividend by 9.8%, bringing the annualized dividend to $2.24 per share from the previous payout of $2.04 per share.

General Dynamics will now pay a quarterly dividend of 56 cents per share compared with the prior quarterly dividend of 51 cents per share. The dividend will be paid on May 10, 2013, to shareholders of record at the close of business on Apr 12, 2013.

This is the sixteenth dividend increase made by the company. The last quarterly dividend hike of 4 cents was made in March last year taking the dividend to 51 cents. The current dividend payout brings the annual dividend yield to 3.31%.

Apart from increasing dividends, the company continues to return value to shareholders through share buybacks. In 2012, the company repurchased 9.1 million shares in the open market. At the end of 2012, 10.9 million shares remained authorized for repurchase.

Other disciplined capital deployment followed by the company includes internal investment and acquisitions and divestitures. The company has used $8.9 billion of cash generated from operating activities over the past three years to fund acquisitions and capital expenditures, repurchase its common stock, pay dividends and repay maturing debt.

Based in Falls Church, Virginia, General Dynamics is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. The company’s revenue exposure is spread over a broad portfolio of products and services that is expected to keep the overall growth momentum steady.

However, we prefer to remain on the sidelines due to the uncertainty related to the defense budgets and U.S debt situation. The company presently retains a short-term Zacks Rank #3 (Hold). In the near term, we would advise investors to accumulate its short-term Zacks #2 Ranked (Buy rating) peer Lockheed Martin Corporation ( LMT - Analyst Report ) .

Other big names in the industry are also focusing on returning shareholder wealth. In Dec 2012, The Boeing Company ( BA - Analyst Report ) raised its quarterly dividend by 10% to 48.5 cents per share from the previous payout of 44 cents per share. The hike raised Boeing’s annualized dividend per share to $1.94 versus the pre-existing $1.76.

Later, in Feb 2013, L-3 Communications Holdings Inc. ( LLL - Analyst Report ) had increased its dividend as well as announced a new share repurchase program. L-3 Communications increased its quarterly dividend by 10%, bringing the annualized dividend to $2.20 per share from the previous payout of $2.00 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.