GD earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1979 and has increased its dividend payments for 21 consecutive years. Dividend Income vs. MMA:
Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA
. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $1,365 is below the $1,400 target I look for in a stock that has increased dividends as long as GD has. If GD grows its dividend at 9.3% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 3.1%. Memberships and Peers:
GD is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index. The company's peer group includes: The Boeing Co.
(BA) with a 2.4% yield, Lockheed Martin Corporation
(LMT) with a 4.5% yield and Textron Inc.
(TXT) with a 0.3% yield.Conclusion:
GD did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks GD as a 3-Star Hold
Using my D4L-PreScreen.xls
model, I determined the share price would need to decrease to $71.05 before GD's NPV MMA Differential increased to the $1,400 minimum that I look for in a stock with 21 years of consecutive dividend increases. At that price the stock would yield 2.8%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,400 NPV MMA Differential, the calculated rate is 9.4%. This dividend growth rate is slightly above the 9.3% used in this analysis, thus providing no margin of safety.