General Dynamics (GD 0.13%) continues to build upon its legacy as a major player in space communications, satellite and radar technology, and engineering outside Earth's atmosphere. The company also recently attained the vaunted Dividend Aristocrat status, delivering at least 25 years of regularly increasing dividend payouts to shareholders.

This achievement, coupled with its history as a diverse supplier of aerospace, military, and other equipment, ensures General Dynamics a place as a top space stock for those looking to generate passive income in this sector.

General Dynamics and the final frontier

When America won the space race to the Moon, a General Dynamics transponder carried the iconic words of Neil Armstrong and Buzz Aldrin back to the nation.

General Dynamics continues this legacy, delivering the latest technology used to connect ground and space systems. Its Missions Systems division manages most of the company's extraterrestrial activities, including communications and satellite ground systems. The military giant also provides both operations and engineering support for multiple space-based systems.

The company's third-quarter report showed revenue increasing 4.3% year over year to $9.98 billion and earnings up 4.9% to $902 million for the period. Diluted earnings per share also increased from $3.07 to $3.26, a gain of 6.1%, indicating continued strength.

The military giant showed resilience this year despite market headwinds, with its share price gaining 23% year to date, while the S&P 500 has lost around 15%.

The power of a Dividend Aristocrat

In March, General Dynamics raised its quarterly dividend to $1.26 per share. The company has raised dividends consecutively for 25 years, allowing it to take a place among those companies touted as Dividend Aristocrats. Regular increases in the dividend help drive interest in the stock as investors look to take part in the continued growth and success of companies that prove their dedication to shareholders. Growing distributions also act as a hedge against inflation.

Investors can make use of the dividend payments to buy more shares of a stock. They may also use the payouts to fund other needs. When it comes to passive income, stability remains key. Such stocks figure into a strong, long-term investment portfolio alongside riskier investments, such as growth stocks, which only impart more value if the share price increases.

Challenges faced by General Dynamics

Competition for government satellite and operations contracts comes from other primarily space-based competitors, such as Rocket Lab USA and Maxar Technologies, who may bid on some of the same space engineering or satellite communications and monitoring tasks. But General Dynamics' integration of its various  divisions makes it easier for the company to connect these different resources to address the needs of such contracts.

Other military leaders, including Lockheed Martin, also have a prominent place in space operations. These two major military companies often find themselves involved in bids for competing projects, as well as working alongside each other on more complex business or governmental operations.

Because operations, logistics, and technological research also fall under the General Dynamics umbrella, this additional flexibility helps overcome these challenges and results in contracts often being shared by multiple companies. This type of shared responsibility offers one more opportunity for revenue generation.

Diversification remains key to success

Much like Lockheed Martin, General Dynamics owes the lion's share of its success to its exceptional diversification. By spreading its offerings across the skies, space, land, and sea, and focusing on specific areas where logistics, communications, and operations intersect, the military giant can capitalize on its investments and make the most of its research and development results.

This diversified infrastructure, backed by the time-tested payout delivery of a Dividend Aristocrat, makes General Dynamics one of the best space stocks to buy for a passive source of funds.