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L3Harris (LHX) Announces Quarterly Dividend Increase of 13%

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L3Harris Technologies Inc. LHX recently announced that its board of directors has declared a cash dividend on its common stock of 85 cents per share, reflecting a 13.3% hike from the prior payout of 75 cents per share.

Post the issuance of the new rate, the annualized dividend will be $3.40 per share. The hiked dividend is payable on Mar 27, 2020, to shareholders of record as of Mar 13. The current dividend yield of the company is 1.69%, higher than the Zacks industry average of 0.91%.

Factors Supporting Dividend Hikes

A stable financial position enables L3Harris Technologies to maximize shareholders’ value through regular dividend payouts and share repurchases. As of Jan 3, 2020, the company’s cash and cash equivalents totaled $824 million compared to $343 million at the end of 2018. Further, in 2019, L3Harris Technologies’ cash inflow from operating activities amounted to $1,655 million, up from $845 million at 2018-end. Notably, the company returned $165 million in dividends to shareholders during the fourth quarter, led by strong operational performance, acceleration of cost synergies and the successful execution of its portfolio shaping strategy.

Going ahead, the company's accelerating revenue growth across its business segments along with margin expansion will most likely improve its operating cash flow. This, in turn, will enable L3Harris Technologies to expand its capital deployment initiatives, including dividend payouts, share repurchases and reinvestments, to grow its businesses. In this line, it is imperative to mention that the company pledges to return more than $3.5 billion through share repurchases and dividends to its shareholders by the end of 2020.

Dividend Hike in the Defense Space

Stocks paying regular dividends are popular among investors for a number of reasons, as they provide income and capital appreciation, decrease overall portfolio risk, and carry tax advantages, among others. The U.S. defense stocks have been rallying significantly in the past couple of years, courtesy of notable defense budget enhancements made by the Trump administration. This, along with growing geopolitical uncertainties, has been fueling growth in this space, which in turn has been bolstering both top and bottom lines of defense stocks. Thus, stable earnings and cash flow enable defense companies to reward shareholders with regular dividend hikes, thereby positioning them in investors’ good books.

Other companies in the same space, who have also raised their dividends in recent times include Lockheed Martin Corporation LMT and Northrop Grumman Corporation NOC. In September 2019, the board of directors of Lockheed Martin authorized a fourth quarter  dividend of $2.40 per share, reflecting an increase of 20 cents from the prior dividend figure. Northrop Grumman's board of directors approved a 10% rise in its quarterly common stock dividend in June 2019.

Price Performance

L3Harris Technologies’ stock has gained 23.7% in the past year against the industry’s decline of  8.3%.

Zacks Rank & Another Key Pick

L3Harris Technologies currently carries a Zacks Rank #2 (Buy).

A top-ranked stock in the same space is Leidos Holdings, Inc. (LDOS - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings delivered a four-quarter earnings beat of 11.19%, on average. It currently has a solid long-term earnings growth rate of 7.5%.

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