Recent Transfer: Northrop Grumman Corporation

Founded in 1939 and based in Falls Church, Virginia, Northrop Grumman Corporation (NYSE:NOC) is a leading global security company with both government and commercial customers. NOC provides systems, products and solutions in unmanned systems; cyber security; command, control, communications and computers intelligence; surveillance and reconnaissance; and logistics and modernization.

NOC is a Dividend Contender with a 12-year streak of dividend increases. The company pays quarterly dividends of 80¢ per share in the months of March, June, September and December. At the current share price of $200, the stock yields 1.60%.

Regular readers will know that I'm busy consolidating several portfolios containing my dividend paying stocks. These posts capture past transactions and dividend income, and I update projected annual dividend income (PADI) accordingly.

Today's transfer adds another new position to DivGro, so I now own 61 different stocks and funds.

Since completing the consolidation of my Scottrade and traditional IRA portfolio's, Ive been transferring stocks from my Roth IRA. Here's a summary of Roth IRA stocks transferred so far:

• Intel Corporation (NASDAQ:INTC)
• Lockheed Martin Corporation (NYSE:LMT)

Here is a chart showing my buy prices:


The 2 buys I'm transferring today are connected with red dashed lines. Average cost basis is $152.50, while yield on cost (YoC) averages to 1.70%. Despite the low yield, I'm happy with my investment in NOC!

Transactions

2014-01-03	Bought: 8 shares of NOC at $114.06 per share:	$	912.48
2014-03-19	Dividend on 8 shares at 61¢ per share:	$	4.88
2014-06-18	Dividend on 8 shares at 70¢ per share:	$	5.60
2014-09-17	Dividend on 8 shares at 70¢ per share:	$	5.60
2014-12-17	Dividend on 8 shares at 70¢ per share:	$	5.60
2015-03-18	Dividend on 8 shares at 70¢ per share:	$	5.60
2015-06-17	Dividend on 8 shares at 80¢ per share:	$	6.40
2015-09-16	Dividend on 8 shares at 80¢ per share:	$	6.40
2015-12-16	Dividend on 8 shares at 80¢ per share:	$	6.40
2016-02-19	Bought: 8 shares of NOC at $190.93 per share:	$	1,527.44
2016-03-16	Dividend on 16 shares at 80¢ per share:	$	12.80
	Total Capital Invested	$	2,439.92
	Total Dividends Received:	$	59.28

With this transfer, DivGro's projected annual dividend income (PADI) increases by $51.20 and I'm adding $59.28 in past dividends to DivGro's total dividend income.

Ratings and Fair Value Estimates for NOC

Following is a table containing updated ratings of NOC from various sources:

Morningstar Ratings  (**---) Credit Rating: A-   Dividend.com's DARS Rating   3.4/5 (Neutral)  TheStreet Ratings Rating   Buy [A-]  The Motley Fool's CAPS Rating   (****-)  Thomson Reuters StockReport+  (9/10) Positive   S&P Capital IQ Stock Report  Sell (**---) Quality Ranking: A   Zacks Rank and VGM† Style Score  4-Sell (VGM:B)  Tipranks Analysts Consensus Rating   Strong Buy

†combined Value/Growth/Momentum score

Morningstar's fair value estimate of NOC is $176.00, whereas S&P Capital IQ calculates a fair value of $173.40. According to Tipranks, based on 4 ranked analysts offering 12-month price targets for NOC, the average price target is $210.25. Finally, using a Comparative Analysis based on EBITDA, courtesy of finbox.io, NOC has a fair value estimate of $189.69 (see below).

The average of these valuations is $187.34, which means NOC is trading at a premium of about 7% to fair value.

Why NOC?

Here are some reasons why I like NOC:

1. The stock's 10-year dividend growth rate (DGR) is an impressive 13%! If we divide the 5-year DGR by the 10-year DGR, we get 1.02, which means the company is sustaining and slightly accelerating dividend increases. The most recent dividend increase was 14.3%.
2. The payout ratio is low at about 30%. NOC has an aggressive share buyback program, which continues to bolster the stock price.
3. NOC generates income from a diverse mix of aerospace and defense businesses.
4. The company generates $2.5 billion in annual operating cash flow and should be able to withstand reasonable budget cuts.
5. Value Line has a Financial Strength Rating of A++ and a Safety Rank of 1. 

What do you think of NOC. The yield is quite low for a dividend growth stock, but the dividend growth rate is solid. Do metrics like that excite you? Please share your thoughts in the comments section below.