Stock Analysis: GD

General Dynamics Corporation (GD) is an aerospace and defense company offering products and services in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. Formed in 1952, GD has grown steadily through the acquisition of more than 60 businesses, and now it employs about 95,000 people worldwide. GD is headquartered in Falls Church, Virginia.

GD is on my watch list. I'm interested in adding GD to DivGro because it would increase my diversification in several ways. GD is in the Capital Goods sector and pays quarterly dividends in January, April, July and October. The yield hovers around 3%.

Gazing into the Future

The main goal of DivGro is to generate a reliable and growing dividend income stream. I hope to achieve a 12% yield on cost (YoC) within ten years of inception. And I hope to generate acceptable total returns exceeding the performance of the S&P 500 index.

In this post I'd like to gaze into the future, to ten years from now. If I'm disciplined and lucky, and I follow my plans and strategies carefully, what could DivGro be worth? And what can I hope to receive in dividend income?

Starting with an initial investment of $12,000 and adding $1,000 per month for ten years, I'll have a total of $132,000 invested. Of course, ending with a portfolio value of "only" $132,000 after ten years of investing would be rather disappointing. Hopefully the value of the stock market would gradually increase over time and the value of my portfolio would increase also.

Recent Buy: NTT

Feb 13, 2013: Bought 110 shares of NTT at $22.43 per share.

Nippon Telegraph & Telephone Corp (NTT) is a provider of fixed and mobile voice related services, IP/packet communications services, sales of telecommunications equipment, system integration and other telecommunications related services in Japan. Shares of NTT are represented by an American depository receipt (ADR) at the New York Stock Exchange (NYSE).

NTT is a Dividend Contender with an 11-year streak of dividend increases. It pays dividends semi-annually, in March and September. At $22.43 per share, the last dividend payment of $0.4853 per share represents a yield of 4.33%.

Selection Criteria

I've designed selection criteria for dividend paying stocks to help me identify appropriate candidates for DivGro. My main goal is to generate a reliable and growing dividend income stream. Reliable income comes from companies that not only pay dividends regularly, but can be counted on to pay the same (or increasing) dividends regularly. Of course, I prefer dividend payers that increase their dividends over time. Such companies generate enough cash to pay dividends and they grow earnings over time to afford dividend increases.

The often cited disclaimer that "past performance is no guarantee for future results" has a counterpart for dividends: "there is no guarantee that dividend paying companies will continue to pay or increase their dividends". Several companies with long histories of paying dividends broke those streaks during the recent financial crisis. For example, in 2009, both General Electric (GE) and Pfizer (PFE) cut their dividends for the first time in decades, and many companies eliminated their dividend payments altogether.

Despite the above mentioned disclaimer, a long streak of dividend increases is a great indicator of financial security and continued dividend growth. If a company has a long track record op paying increasing dividends, chances are it has the ability to continue doing so. And if a company has a long track record of increasing dividend payments, it would have a strong aversion to decreasing or eliminating dividend payments.

Monthly Review, January 2013

The first month of DivGro has been rather busy. I've set up the portfolio at www.folioinvesting.com, deposited my initial investment capital, and arranged for a recurring deposit to add additional investment capital every month. I've also set up this blog, populating it with a variety of pages to track goals, transactions, dividend payments, and portfolio performance, and more. I've written six posts, three of which are Recent Buy's that will accompany all stock purchases for DivGro. Meanwhile, I've done a lot of research on dividend growth investing, using the wealth of information available on the internet and referencing similar dividend growth investment blogs as inspiration. I have much more to learn, a prospect I find exhilarating!

With this series of Monthly Review posts, I'll reflect on DivGro-related activities of the previous month and I'll provide a snapshot of portfolio performance. Here is a review of what happened in January: