Kiss These Dividends Goodbye!

With dividend investing currently back in vogue, investors are clamoring for income-producing investments. And while we here at The Motley Fool certainly support finding a healthy stream of investment income, we recognize not all dividends are created equal. As with all investments, you need to understand both the potential risks and the possible rewards before investing any of your hard-earned capital. In that vein, I want to highlight for you today a sector riddled with dividend stocks -- not to buy, but to avoid like the plague.

Those were the days
The 2000s proved a boom for defense investors. The realities of the post-9/11 world bolstered our need to spend more money to maintain our national safety -- and by a pretty wide margin. For instance, the Department of Defense requested funding of $291.1 billion for the fiscal year 2001. In 2011, the DoD sought $708 billion in funding, equating to a 9.3% annual growth rate over the last decade. And, perhaps unsurprisingly, the defense industry as a whole benefited mightily from the uptick in activity, as you can see below.

Company

10-Year Share Price CAGR

Dividend Per Share 10-Year Growth Rate

Current Dividend Yield

Lockheed Martin (NYSE: LMT  )

8.2%

20.7%

4.3%

Northrop Grumman (NYSE: NOC  )

6.0%

16.9%

3.8%

United Technologies (NYSE: UTX  )

9.3%

14.9%

2.6%

General Dynamics (NYSE: GD  )

6.1%

12.7%

3.0%

Boeing (NYSE: BA  )

3.6%

10.0%

2.7%

Raytheon (NYSE: RTN  )

6.5%

7.2%

4.2%

ITT (NYSE: ITT  )

8.8%

10%

2.1%

S&P 500

2.1%

N/A

1.8%

Source: Capital IQ, a Standard & Poor's company. N/A = not applicable.

If you'd just held a basket of the larger defense contractors over the past decade, you'd have absolutely smashed the market's returns. Investors loved this sector -- and for good reason. Beyond the juicy returns shown above, the defense industry also derives a substantial amount of its revenue from governments (the U.S. federal government, especially), giving investors a greater degree of protection from the economic cycle than most stocks. This powerful combination helped make defense an attractive option, allowing investors to both outperform the market and diversify risk away from consumer spending.

The end of an era
Unfortunately for current defense investors, that spending boom also helped drive the federal deficit into the stratosphere, adding $1.2 trillion to our financial shortfall by themselves, according to some estimates. In this year's budget, the DoD intended to allocate $159 billion of the requested $708 billion for its overseas conflicts, which it seems safe to say will end at some point. This means that entire $159 billion should vanish from the revenue streams of these now-titans. This brings the possible range of cuts into the ballpark of $194 billion annually, or roughly 28% off all defense spending this year, between these two issues alone.

In order to further combat our burgeoning budgetary woes, Congress supported $350 billion in defense-related spending cuts over the next 10 years as part of its recent deficit-reduction plan. Worse yet, if the supercommittee appointed by Congress fails to negotiate that pre-specified $350 billion in cuts, the mandated cuts then increase to a required $500 billion.

This will undoubtedly impact the future performance of these contractors for the worse. During the last defense drawdown, which took place from 1985 to 1997, defense stocks underperformed the stock market by 33%. A similar scenario this time around seems more than plausible to me.

Foolish bottom line
What would you expect if your main revenue stream faced an impending 28% reduction? Nothing good. The companies involved see less business come through the door, compete more vigorously with one another, all hell breaks loose, and those dividends so near and dear to your heart get crushed.

I argued in the past for the contrarian play with defense stocks. That's no longer the case. Better to avoid that massive looming risk than see your portfolio get nuked. The market has plenty of great dividend stocks out there. Research proves those little checks help investors beat the market and retire in style. The Motley Fool has compiled a report for you highlighting some of best dividend opportunities on the market. Click here to get your free copy today.

Andrew Tonner holds no positions in any of the companies mentioned in this article. The Motley Fool owns shares of Raytheon, General Dynamics, Lockheed Martin, and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (45) | Recommend This Article (101)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 17, 2011, at 4:19 PM, busterbuddy wrote:

    Well Boeing never moved up to 105 because of Defense Spending. And when the Dreamliner delays became apparent the stock dropped to 30's. And that is what has caused the big run up in Boeing.

    But your mistaken if you think the dividends are going away for any of these defense companies sadly mistaken.

    There will be a helicopter program and a missile defense program and a new vehicle program. What is going to get cut is the billions on R&D funding that goes into a big hole with no returns.

    Command and Control systems will be updated. UAV will be updated. And integrated systems will be updated. And all the over 50 guys and gals will get laid off and replaced by two 20 year olds.

    And there will be companies bought out at the lower levels. But watch Airbus and EADS they need to purchase companies. The military and airplane cycle are ten year or more cycles and there are many of them in the pipeline.

    Finally when the 7 Dreamliner is delivered and people say ok its working what do you think will happen to Boeing, Honeywell etc.

    Finally the logistical arm of military equipment goes on for years. Cruise missiles have to be replaced, parts have to be ordered, the sustainment profits are big.

    So I'd look for opportunities to accumulate and not assume dividends get cut. Lockheed raise their dividend last year, you think they don't do 10 year analysis on profit and revenue streams?

  • Report this Comment On August 17, 2011, at 5:16 PM, Chontichajim wrote:

    I wish I had $100K for every year the defense industry was going to go belly up in my lifetime. There needs to be changes from a Carrier based Navy and reductions in wars, just as we had changes to close military bases (all of them in SF Bay Area) and shrink the size of the military in past reductions.

    I would be more intereseted in researching which businesses had the right systems for the next generation of military spending and which have obsolete systems and make changes accordingly, instead of giving up on this political cash cow that neither party is likely to do.

  • Report this Comment On August 17, 2011, at 5:27 PM, schreibs wrote:

    Won't they continue paying because most companies are sitting on tons of cash? That would be the source for continuing to pay the dividends.

  • Report this Comment On August 17, 2011, at 5:33 PM, mikecart1 wrote:

    This article is the king of Motley Fool. When Lockheed Martin or Northrop Grumman stop paying a dividend, I will personally hand each Motley Fool employee a $100 check. I don't need to worry about losing bank because that ain't happening homie!

  • Report this Comment On August 17, 2011, at 5:52 PM, powder2 wrote:

    Blah, blah, blah. Every 10-yrs the politicians trot out this politically popular notion that defense spending not only can be cut, but that they have the guts to do it (if only re-elected.)

    Sad truth is: wars cannot be eliminated by legislative decree.

    At each of those times when it is popular to cut govt. wasteful spending, especially defense, is when the global economies are tanking. And, when economies are tanking: wars are much more likely to occur.

    Maybe I'm being insensitive to the current SIZE of the proposed cuts and the likely effects upon the defense industries, because I'm not running for cover. I just plain refuse to believe that "this time is different." That is not likely--in my humble opinion.

  • Report this Comment On August 17, 2011, at 6:09 PM, FoolSolo wrote:

    But to the point of the article, if there are defense cuts, which I'm pretty sure there will be, what will happen to these stocks? At a minimum, they will likely see some pullback of some kind on share price. If hit hard enough, won't that also translate into dividend cuts?

  • Report this Comment On August 17, 2011, at 6:10 PM, fnmccul wrote:

    Lockheed Martin was at $13.35 in January 1985 and $49.25 in December 1997. Had an investor had the misfortune of owning LMT stock during this drawdown he would have suffered an annualized 11.5% return before dividends. Dividends during the period added 1.5% to 2% to the annual return.

    Lockheed stock did suffer from 1998 to early 2000 due to lack of demand from tech-hungry speculators, not poor fundamentals.

    I will be quite satisfied if this defense drawdown produces investment results as unsatisfactory as the last.

  • Report this Comment On August 17, 2011, at 6:10 PM, praizinplace wrote:

    Wow, really hit a home run with this stellar prognostication Fool...hasn't all of your sky fallen yet? They really should establish some minimums for being allowed to just post any random fodder on a website read by people who actually need sound financial investment advice instead of this drivel ... sleep well, you've earned another wonderful nights rest of a true fool.

  • Report this Comment On August 17, 2011, at 6:16 PM, mikecart1 wrote:

    Man praizinplace, you show no mercy! I like! :o]

  • Report this Comment On August 17, 2011, at 6:42 PM, powder2 wrote:

    Everyone is entitled to an opinion. No need for personal character assassination. Take it or leave it.

    FOOLS only promise food for thought.

  • Report this Comment On August 17, 2011, at 6:44 PM, powder2 wrote:

    ad hominem

  • Report this Comment On August 17, 2011, at 8:29 PM, fnmccul wrote:

    More like caveat emptor.

  • Report this Comment On August 17, 2011, at 11:26 PM, jomueller1 wrote:

    Does not impress me much. Not the article nor the spending cuts. The writing is on the wall, so a slump in the war complex (it is not defense) is a given.

    But 350 billion over ten years sounds like a lot. Or not? An annual cut of 35 billion does not have much of an effect, except may be more unemployment. But I would not support the wars to create employment.

    The pampered war suppliers might just sell their stuff to some other dictators. Did Iran buy some fighter jets? No? To bad!

  • Report this Comment On August 17, 2011, at 11:27 PM, powder2 wrote:

    OK. caveat emptor. I can accept that.

    Ad hominem against the author is unwarranted.

  • Report this Comment On August 18, 2011, at 12:11 AM, WhidbeyIsland wrote:

    Back in the day of silly idealism, a popular slogan was "What if they gave a war and nobody came?"

    While there are lots of people who live peacefully, the idea has never caught on widely enough to leave generals standing on the corner holding signs saying, "Will kill your worst enemy for food."

    There is a streak of optimism and altruism in the Fool world, but it's generally undercut by a healthy cynicism about what a rotten species humans are and an awareness of how betting on our worst instincts is not likely to leave us broke.

  • Report this Comment On August 18, 2011, at 3:01 AM, george5729 wrote:

    "Millions for defense, sir, but not one cent for tribute!"

    Silly rabbits, wars are for kids.

  • Report this Comment On August 18, 2011, at 9:47 AM, geecheegirl wrote:

    I have to say, I don't have nearly as much confidence in Motley Fool guidance as I once did years ago, when much of the info was actually coming from the Gardner brothers. Now that they have so many hired Fools "contributing" with a multitude of daily articles, it often seems their job is simply to come up with something to write about. I am a person who needs and appreciates genuine, dependable guidance. I can't tell you how many times I've been steered so VERY wrong by some of these articles. It's getting to where even I (as dumb as I am) can spot the inexperienced writers of these articles. I miss the days when we could count on the good, reputable advice from MF.

    As for dividends in particular.....I have to say, "shame on all the advisers and analysts writing all those articles pushing dividend stocks for over a year now!" They fail to warn naive investors who really depend on that income that if they buy too high, that dividend will not even offset the loss of principal. By writing all these articles (obviously THEIR source of income) the share price of most of these "dividend stocks" has been pushed too high. Every time there's a "scare" and the market dives, these share prices fall, too. If the economy sours further and the market declines, who knows how long it will be, if ever, that you recover your principal.....even with those dividends figured in that you relied on for extra income??? I've watched this happen over and over. You "article writers" need to start warning people to beware at what share price they get into these great dividend paying companies!!! These articles have driven many people into buying, buying, buying.....and when this pattern changes, as all patterns do, and investors jump into the next "whatever is being peddled", and/or dividends get cut ...... where's all these novice dividend investors going to be left? What if CD rates eventually go up? What will happen to those wonderful dividend stock share prices then??? That dividend isn't worth a flip if it takes all that and more to try to salvage one's investment principal. These articles DO drive up stock prices.....and how sad for the ones who buy in at those prices. Many of us need some income now. But I just can't feel secure spending the dividend while I watch my investment plunge with the market. Share price of many of those "great dividend stocks" pitched in these articles will never get back up there. Others will.....but WHEN? Starbulk (SBLK) is a prime example that comes to mind .... a MF Caps 5-star recommendation. Look at where you'd be if you bought that "stellar" dividend payer earlier this year.

    Motley Fool could do us all a favor, in many ways, by reining in these "article writers". Temporarily driving up share price isn't helping anyone. Neither is misleading the inexperienced investor by not "telling it all".

  • Report this Comment On August 18, 2011, at 9:50 AM, praizinplace wrote:

    No personal attack or assasination intended. Every article Motley Fool writes that has anything to do with Boeing is a doom and gloom-theskyisfalling-bailoutwhileyoucan-they'llnevermakeit type article. I label that "drivel" and it is scary that you are allowed to scatter that mess on the internet where honest, hard working investors are trying to find their way to sound investment advice. In a word, "STOP!". Go write for a comic strip of something fictionally interesting and harmless.

  • Report this Comment On August 18, 2011, at 1:12 PM, waterfall35 wrote:

    Well written geecheegirl, and I agree. Seems like so many articles are a waste of time to read and not good guidance. Everyone has the liberty of free speech with their ideas, but I think many of the articles are opinionated trash.

  • Report this Comment On August 18, 2011, at 1:31 PM, dunkim1 wrote:

    What make you think that these companies are just selling to the US goverment?

  • Report this Comment On August 18, 2011, at 4:45 PM, backedbycash wrote:

    If you think defense stock dividends are going away you are very wrong.Congress members who depend on their campaign contributions will always see that they get contracts and make profits.Those companies have the strongest lobby in DC.Wake up to reality.The little guy is a pimple on an elephant's ass with pols.The corporations are the big kahoona for those phonies.

  • Report this Comment On August 19, 2011, at 1:00 PM, mgibbon80 wrote:

    Sure there will be cuts, but don't confuse cutbacks from cut out. The programs get stretched out to save money per fiscal year, but the unit price goes up per contract. Generally speaking, America will thow mama from the train before it gets serious about a material elimination of existing programs. Jobs, China, Iran, North Korea, politics, republicans, hegemony are powerful drivers before much happens except around the margins. First cuts will be around winding down the wars, general force reduction & cost of global footprint - then a look see at programs. Make the Europeans pay for their missle defense. Look for program cut outs @ 10 years +. Still, don't expect dividends to GO UP!

  • Report this Comment On August 19, 2011, at 2:15 PM, otto32848 wrote:

    I'd be concerned about the dividends if I thought there would be actual cuts, rather than reductions in scheduled increases. They're not really cuts! When things get bad enough we'll see actual cuts but I don't think it will happen for a few years. It will take a few election cycles to clean house. That said, I wouldn't invest in ANYTHING with the expectation that it's going up. At some point the music will stop and there will be 3 chairs for 300 million. It may be next week, or 5 years from now.

  • Report this Comment On August 19, 2011, at 3:09 PM, WdanW wrote:

    I was going to comment but my sentiments reflect those already noted.

    I would offer that this article was floated as "The Weeks Top Story" in "The best free Fool.com articles for the week ending August 19, 2011", so a bit of research into the author's style is in order -- click on his 'More Articles' link. I suppose everyone is entitled to an opinion.

    \...due diligence

  • Report this Comment On August 19, 2011, at 3:15 PM, WineHouse wrote:

    I am familiar with Lockheed Martin and with United Technologies. Both of those businesses go far beyond "defense industry." While defense business may be part of both, those two companies are hardly dependent on Federal defense spending for their growth. I am therefore not worried about those two in the context of this article, even if defense spending is really cut to the extent implied by the article (which probably won't happen).

    I don't know enough about the other companies on the list to comment on their dependence on Federal defense spending.

  • Report this Comment On August 19, 2011, at 4:29 PM, MuttLeeFool wrote:

    Mr. Tonner,

    If you believe that non-defense spending remained static as a percentage of the total federal budget during the 2000s, I encourage you to seek help for your apparent cranial/rectal inversion.

    Respectfully,

    Muttlee Fool

  • Report this Comment On August 19, 2011, at 4:38 PM, GoNuke wrote:

    I support geecheegirl's position. I no longer pay attention to these articles. They remind me of the cheap or free investment newsletters that rely on hyperbole to promote some action that may look good to the very uninformed but is not based on much real intelligence.

    I am down to two MF newsletters and have canceled the rest. Both of the ones I still subscribe to are dominated by the Gardiner brothers analyses.

    I find Morningstar's analyses more in depth and insightful. I wouldn't consider an MF recommendation without vetting it through Morningstar's premium service.

    There has already been a large rationalization of the defense industry and lots of large acquisition programs have been canceled or scaled back. If you want to do an analysis of which contractors to invest in you need to know what programs they are involved in and what chances those projects have of surviving cuts.

    I spent 25 years in the Defense industry and it is very difficult to predict what is going to happen next. You need to have an intimate knowledge of the industry and the customer. It isn't like any other industry -you cannot apply standard market analytical skills to this industry.

    Defense spending is the way that the US government subsidizes industry. Defense spending is a tool of fiscal policy. During a recession government may choose to spend more on military hardware.

  • Report this Comment On August 19, 2011, at 6:31 PM, iggymonsta wrote:

    The DoD will cut it's people/benefits first before it will cuts its major pet projects. People can be cut faster and brought back faster than anything program. They are already doing the drills and headhunting.

  • Report this Comment On August 19, 2011, at 9:00 PM, donalddmorgan wrote:

    As a dividend investor and advisor for many years, I would agree to SOME DEGREE with the MF that these defense stocks need to be watched closely. With 40% of the federal "income" coming from borrowings and the downgrade in U.S. investments, the government is going to need to start cutting spending across the board and defense will be a part of those cuts. To the extent that some of these companies are more reliant on government contracts, their dividends may be in jeopardy. United Technologies is far less dependent on government contracts then say General Dynamics, so each of these companies needs thorough analysis to determine their vulnrability to reduced government contracts. I would suggest that any free advise be followed by investor due diligence. As one respondent said, he follows up any such advise by checking it with Morningstars advisor service to see if they concur.

  • Report this Comment On August 19, 2011, at 10:47 PM, Witling101 wrote:

    Thank you Geecheegirl for stating so clearly and informatively a quasi-warning to avoid getting too "influenced" by writers that we neither know nor have proof of expertize. I really appreciated what Tom and David shared on the "Meltdown Monday" that dropped 512 pts. Staying on the open chat and reading their advise was one of the best "classroom experiences" in my 65 years of learning!

  • Report this Comment On August 19, 2011, at 11:57 PM, kennycatkiller wrote:

    Having worked almost my entire career for defense and space contractors, I can not understand how they can be good investments, unless one is a principal--that is, one of the owners of the stock and thus able to have one's salary and benefits charged to the government contracts.

    Otherwise, government contracts have a pretty small margin--usually in the 7 to 10% range, depending on the type of contract before income tax (which is not chargeable to the government contracts). Further note that interest is not chargeable to the government contracts, either.

    So, if they can earn even 5 to 7% after tax, any respectable dividend would have to come out of that.

  • Report this Comment On August 20, 2011, at 4:23 AM, mfarm9 wrote:

    Hi folks. I humbly suggest one needs to be very careful about buying LMT. I say this because the F-35 fighter jet they are building is very important to their revenue going forward for many years. If cuts are made to defense spending that is the program that sticks out because it may be the biggest long term DoD contract presently being performed.

    I suggest holding off buying until we have more visibility to upcoming (supposedly) deficit reduction/budget cuts. I'm not saying absolutely do not buy now; however, I am saying one must be prepared to assume higher than "normal" risk because the F-35 program could very well get cut. That would put a hurt on LMT's stock price.

    Happy investing to all.

  • Report this Comment On August 20, 2011, at 3:41 PM, gothspice wrote:

    Wonder if there is any data available on the "small companies" (under 500 employees), that went out of business due to carrying huge inventories as Northrup repeatedly backed off scheduled orders and disallowed legitimate A/P through their Machiavellian head of purchasing. Nothing like working over the Christmas holiday and getting stiffed for a verbal purchase order.

    Wonder how they buried the order for sorting equipment for the USPS after the prototype run.

    Do not buy Northrup stock. Humor a fellow Fool and pick another behemoth.

  • Report this Comment On August 20, 2011, at 5:09 PM, TMFTheDude wrote:

    Hi everyone,

    Thanks everyone for reading my article. I appreciate your time and feedback.

    We here at the Fool come from a diverse set of investing backgrounds. We recognize that what works for one investor might not for others. We have different strategies on how to best invest our money. As part of a large investing community, we’ll naturally disagree from time to time with what other writers say and recommend. More than anything, we view this as a strength our community, allowing each of us as to examine multiple viewpoints and draw well-informed conclusions.

    Having said that, I’d like to respond to some of the criticism this article received from those that disagreed with its basic premise: that the likelihood of reasonably substantial cuts to defense spending will adversely effect defense contractors’ dividend payments. I drew this opinion from a few overarching themes. Namely that:

    1) The recent debt reduction initiative passed by Congress included a minimum of $350 billion of cuts from the base defense budget over the next 10 years. As mentioned, this figure automatically increases to a mandatory $500 billion in cuts over the next decade if the Congressional “super committee” fails to reach an agreement on the $350 billion in cuts. You can find the details here in the second bullet point of part two:

    http://www.whitehouse.gov/fact-sheet-victory-bipartisan-comp...

    The $35 billion pledged reduction equates to 6.4% reduction to baseline defense spending (spending not earmarked for use in overseas campaigns) in terms for the 2011 DoD discretionary budget of $549 billion. You can find the figures here:

    http://www.defense.gov/releases/release.aspx?releaseid=13281

    2) U.S. overseas conflicts in Iraq and Afghanistan would come to an eventual drawdown at some point relatively soon. Spending on our overseas campaigns accounted for 22.4% ($159 bil/$708 bil; same link directly above) of the DoD’s budget for fiscal 2011. And while I’m not trying to say all of it will get immediately cut, the point is a substantial amount of defense spending should get cut, anywhere from 28% or so on downward. Again, the underlying idea is it should be substantial.

    Carrying this idea one step further, I suggested these cuts should negatively impact companies that rely on government defense spending as a major portion of their revenue.

    As additional headwinds, the federal government has already started clamping down on paying for cost overruns on fixed term contracts.

    http://www.bloomberg.com/news/2011-08-09/pentagon-protected-...

    In an age of fiscal austerity, it seems to me quite plausible that this trend should continue. Overall, the article asserts decreased defense spending will hurt dividend paying defense stocks. Especially since these stocks now trade at some pretty attractive valuations, I wanted to issue an article detailing the risks to income-seeking investors.

    Please feel free to keep sharing your thoughts. As Fools, we always welcome a spirited debate. I appreciate all of your time and look forward to keeping the debate going.

    Foolish investing,

    Andrew Tonner

  • Report this Comment On August 22, 2011, at 10:35 AM, liberalalso wrote:

    The only place left to cut is the military budget. Taxpayers are getting sick of these huge corps on the dole. If Congress goes ahead and dumps 20 year pensions in the service in favor of 401k's we really won't have anyone left to fight wars. Procurement in the military has long been an area filled with fraud and overpayment. If this area is ever given a budget they have to live by the government grants given to these companies will possibly put some out of business. It would be better to have these companies stop padding their government grant applications with huge amounts of money for administration and stockholder benefits instead of using our tax money to benefit people that have nothing to do with providing for our defense

  • Report this Comment On August 22, 2011, at 6:29 PM, borngiantsfan wrote:

    funny - this article says the dividends are going away. Today SmartMoney has an article saying that 4 of these are safe - http://www.smartmoney.com/invest/stocks/defense-stocks-look-...

    who do you believe?

    Andrew Tonner (fool author) has been been a Financial Editor at the Motley Fool since January of this year. Before that he was ... in college.

    Jack Hough (Smart Money author) has been in the industry for 8 years and is currently an Associate Editor for Smart Money and writes for the magazine and the Wall Street Journal.

    now that you have more information about the authors, who will you listen to?

  • Report this Comment On August 23, 2011, at 8:29 AM, praizinplace wrote:

    Well done borngiantsfan. If you look abit more at most of the foolish authors, you'll find similar backgrounds. I reduced my reading Fool to perusing just for the comic relief and yet find myself only angry that they are allowed to misguide folks who heed even a jot or tittle of their advice.

  • Report this Comment On August 23, 2011, at 8:52 AM, TMFTheDude wrote:

    @ borngiantsfan & praizinplace:

    What parts of the do you disagree with? These comments seem like they only attack me, not the article itself.

    I welcome any kind of analysis that will disprove this piece.

  • Report this Comment On August 23, 2011, at 3:33 PM, Weilster wrote:

    Funny. In an article on May 13, 2011, Brian Richards wrote that one of the stocks that he thought was a safe dividend play was General Dynamics - now listed as "at risk". Has something changed? We knew that defense spending had to be cut.

  • Report this Comment On August 24, 2011, at 11:38 AM, sspsyd wrote:

    I assume that if the defense stocks begin to cut dividends, their share prices will also decline. What are some instances where this is not necessarily the case?

  • Report this Comment On August 25, 2011, at 12:09 PM, RaulChapin wrote:

    to sspsyd:

    Their yield relative to other investments with similar risk is what will affect the price on the Income investment poriton of the demand.

    So if the average yield/risk ratio drops more than the %yield drop in the defense contractors their prices could increase while their dividend yield decreases.

    Another possibility is that of growth or value investors suddenly becoming very interested in the sector. The Yield is not very relevant to growth or value investors.

  • Report this Comment On August 25, 2011, at 12:12 PM, RaulChapin wrote:

    ...oops... second paragraph should have read:

    So if the average yield/risk ratio drops a higher %than the % drop in yield/risk for the defense contractors their prices could increase while their dividend yield decreases.

  • Report this Comment On August 26, 2011, at 10:15 PM, RxDan1 wrote:

    So glad somebody finally trashed the Defense stocks--there is better stuff out there and I agree with your assessment as it relates to the Recession. Now, go after the stupid Oil stocks and you will really make my day !

  • Report this Comment On August 26, 2011, at 10:23 PM, RxDan1 wrote:

    djklsob

  • Report this Comment On August 29, 2011, at 3:22 PM, praizinplace wrote:

    @TMFTheDude; instead of me offering anything in the form of rebuttal or for the sake of arguments(which is NOT my job, that's YOUR job), can you defend your assertion that we investors are to "Kiss These Dividends Goodbye" juxtaposed this article and a slew of others like it?

    http://www.investorplace.com/2011/08/boeing-ba-dreamliner/?c...

    Get off your island man, you're sinking good people with this mess!

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