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Instant Analysis: General Dynamics Raises Dividend by 10%, Expands Buybacks

By Eric Volkman – Mar 7, 2016 at 12:04PM

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The veteran defense company is paying a new rate of $0.76 per share and adding 10 million shares to its stock repurchase program.

What happened?
Defense giant General Dynamics (GD 0.06%) is adding some force to its quarterly dividend and its share buyback program.

The company has declared a fresh quarterly payout of $0.76 per share, an increase of 10%. In doing so, it was quick to point out that this is the 19th year in a row it has added to its distribution. Over the past decade, the dividend has risen from $0.23 to the present level.

IMAGE SOURCE: GENERAL DYNAMICS.

The new payout is to be dispensed on May 6 to stockholders of record as of April 8. At the current share price, it yields 2.2%, or roughly the same percentage as the average of the dividend-paying stocks on the S&P 500 index.

As for the share repurchases, General Dynamics' board has authorized the company to enhance its existing program by up to 10 million of its shares.

Does it matter?
You could almost set your watch by General Dynamics' dividend raises. For years, they've been enacted at roughly the same time on the calendar and by percentage increases around the 10% mark. The company also habitually buys back its stock, so neither piece of news should rattle the share price much.

Although revenue growth over the past few years has been more or less stagnant, the big company has managed to lift its key profitability metrics. In fact, fiscal 2015 saw it notch all-time company records for per-share earnings, margins, and return on sales, among other metrics. All told, the bottom line came in at just under $3 billion, on $31.5 billion in revenue.

Operating and free cash flow are both down a bit compared to previous years, but there's still plenty in the tank for shareholder-friendly measures like the enhanced dividend and the expanded buyback initiative. There is plenty of reason to be bullish on this company.

Eric Volkman has no position in any stocks mentioned, and neither does The Motley Fool. 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.

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