If you've ever had an interest in business aviation, combat vehicles, weapons systems and munitions or shipbuilding and ship repair, General Dynamics Corporation (NYSE: GD) might be right up your alley.
General Dynamics pays an annual dividend of $5.04 per share and has a dividend yield of 2.1%. Let's take a look at what you should know about General Dynamics Corporation, its recent performance and how to buy shares of the company. By the time you're done reading, you'll have a better idea of whether you should make General Dynamics a part of your portfolio.
What to Know About General Dynamics
General Dynamics Corporation is a worldwide aerospace and defense company headquartered in Reston, Virginia, which designs, manufactures and sells the following:
- Business jets
- Aircraft maintenance and repair
- Management, charter, aircraft-on-ground support
- Completion, staffing and fixed-base operator services
- Nuclear-powered submarines
- Surface combatants
- Auxiliary ships for the United States Navy
- Ships for commercial customers
- Crude oil and product tankers
- Container and cargo ships
- Navy ship maintenance and modernization services
- Lifecycle support and repair services
- Program management, planning, engineering and design support services for submarines and surface ships
- Land combat solutions
- Modernization programs
- Information technology solutions
- Mission support services
- Mobile communication
- Computers and command-and-control mission systems
- Intelligence, surveillance and reconnaissance solutions
- Cloud computing
- Artificial intelligence and machine learning
- Big data analytics
General Dynamics' Q2 2022 results included net earnings of $766 million on revenue of $9.2 billion, with diluted earnings per share (EPS) of $2.75, a 5.4% increase from a year ago. Defense segments showed operating performance and net cash provided by operating activities totaling $659 million. The company also ended the quarter with $2.2 billion in cash and equivalents; net cash provided by operating activities totaled $2.6 billion, or 176% of net earnings.
During the most recent quarter, the company invested $224 million in capital expenditures, paid $349 million in dividends and used $800 million to repurchase shares. In the past quarter, General Dynamics Corporation has also been awarded the following:
- $410 million for production for the mobile protected firepower vehicle (with a maximum potential value of $1.1 billion) from the U.S. Army
- $295 million for various munitions and ordnance with additional option value of $465 million $525 million from the Army to upgrade Stryker vehicles
- $500 million from the U.S. Navy to construct two additional John Lewis-class (T-AO-205) fleet replenishment oilers
- $355 million to produce Abrams main battle tanks
- $160 million (with a maximum potential value of $325 million) from the U.S. Space Development Agency to build and operate ground systems for the new low earth orbit (LEO) satellite network
- $315 million from the Navy for submarine industrial base development and expansion for the Columbia-class submarine program
- $545 million for several key classified contracts
How to Buy General Dynamics
Take a look at some steps you can take to decide whether General Dynamics can find a place in your portfolio.
Step 1: Evaluate your needs.
Before you decide to invest in General Dynamics, take time to decide what's appropriate for your portfolio. You may want to consider your age, how much time you want to spend growing your investments, how much money you'd like to invest, future needs and other types of investments you already have. Consider your preferences for a higher-risk portfolio or a conservative (lower-risk) portfolio. Investing all your money in one stock like General Dynamics Corporation could be considered high risk because you're putting all your money into one stock instead of spreading your investment into a more diversified approach. It's a good idea to get a sense of how your investment preferences may change as you age.
Step 2: Analyze the company.
Dig a little deeper by analyzing the data that can help you decide whether the investment is worth your while In analyzing the fundamentals of a company, which includes analyzing the management of the company, its industry cycles, its price-to-earnings ratio, return on equity, total return and more.
- Price-to-earnings (P/E) ratio: The price-to-earnings (P/E) ratio outlines a company's share price to its earnings per share. You can calculate it by dividing the market price of a share by the earnings per share.
- Return on equity (ROE): You can calculate return on equity by taking net income and dividing it by shareholder equity: (Return on Equity = Net Income / Shareholder Equity). You can use this figure to determine a corporation's profitability and learn how efficiently it does so. The higher the ROE, the better.
- Total return: Total return is the actual rate of return over a specific evaluation period. Total return includes interest, capital gains, dividends and distributions realized. You can use the formula Total Return = (Final Investment Value-Original Investment Value) + Distributions from the investments)/Original Investment value*100%.
- Calculate dividend yield: Determine the dividend yield of General Dynamics, which you can do by taking the annual dividend per share divided by the stock's price per share. As of this writing, the dividend yield of General Dynamics Corporation is 2.08%.
Step 3: Determine the number of shares you want to purchase.
As long as you already have a brokerage account, you can purchase shares of General Dynamics Corporation. Decide the number of shares that fit into your budget (currently, as of this writing, one individual share costs $241.48. Some brokerage accounts allow you to purchase fractional shares of stock.
You may also want to consider how many shares of other stocks you've already invested in to determine whether you have a diversified portfolio, which means there's a wide variety of balance in the stocks you've invested in.
Currently, General Dynamics pays out 42.6% of its earnings in the form of a dividend. With its healthy payout ratio, it is structured to be able to continue its dividend payments into the future. General Dynamics has raised its dividend for 32 consecutive years. Its high yield and dividend growth track record may poise it for a landing in your portfolio.
However, take a look at all the various factors before you make a final decision about whether General Dynamics deserves another look.
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|General Dynamics (GD)||$251.81||-0.2%||2.00%||20.97||Moderate Buy||$267.50|