Friday, April 22, 2016

Recent Transfer: Raytheon Company

Established in 1922 as the American Appliance Company, today Raytheon Company (NYSE:RTN) is a leading U.S. military contractor, specializing in defense, security and civil markets throughout the world. The company provides state-of-the-art electronics, mission systems integration, cyber security systems, and communications and intelligence systems. It also provides business and special mission aircraft. RTN is headquartered in Waltham, Massachusetts.

RTN is a Dividend Contender with a 12-year streak of dividend increases. The company pays quarterly dividends of 73.25¢ per share in the months of February, May, August and November. At the current share price of $126, the stock yields 2.32%.

I'm busy consolidating several portfolios containing my dividend paying stocks. The process is almost complete with only a couple of positions still to be transferred. Today's transfer is a new position for DivGro, so I now own 62 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:
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 $107.43, while yield on cost (YoC) averages to 2.31%.

2014-01-03  Bought: 11 shares of RTN at $89.35 per share:$982.88
2014-05-01Dividend on 11 shares at 60.5¢ per share:$6.66
2014-08-07Dividend on 11 shares at 60.5¢ per share:$6.66
2014-10-30Dividend on 11 shares at 60.5¢ per share:$6.66
2015-02-05Dividend on 11 shares at 60.5¢ per share:$6.66
2015-04-30Dividend on 11 shares at 67.0¢ per share:$7.37
2015-08-06Dividend on 11 shares at 67.0¢ per share:$7.37
2015-11-12Dividend on 11 shares at 67.0¢ per share:$7.37
2016-02-04Dividend on 11 shares at 67.0¢ per share:$7.37
2016-02-19Bought: 13 shares of RTN at $122.73 per share:$1,595.49
 Total Capital Invested $2,578.37

Total Dividends Received:$56.10

With this transfer, DivGro's projected annual dividend income (PADI) increases by $70.32 and I'm adding $56.10 in past dividends to DivGro's total dividend income.

Ratings and Fair Value Estimates for RTN

Following is a table containing updated ratings of RTN from various sources:
 Morningstar Ratings (***--) Credit Rating: A-'s DARS Rating  3.4/5 (Neutral)
 TheStreet Ratings Rating  Buy [A]
 The Motley Fool's CAPS Rating  (-----)
 Thomson Reuters StockReport+ (6/10) Neutral 
 S&P Capital IQ Stock Report Hold (***--) Quality Ranking: A 
 Zacks Rank and VGM Style Score 3-Hold (VGM:C)
 Tipranks Analysts Consensus Rating  Moderate Buy
  †combined Value/Growth/Momentum score

Morningstar's fair value estimate of RTN is $119.00, whereas S&P Capital IQ calculates a fair value of $131.60. According to Tipranks, based on 3 ranked analysts offering 12-month price targets for RTN, the average price target is $140.00. Finally, using a Comparative Analysis based on EBITDA, courtesy of, RTN has a fair value estimate of $125.66 (see below).

The average of these valuations is $129.06, which means RTN is trading at a discount of about 2% to fair value.

Why RTN?

Here are some reasons why I like RTN:
  1. RTN's 10-year dividend growth rate (DGR) is a solid 11.8%. The company recently increased its quarterly dividend from 67¢ per share to 73.25¢ per share, an increase of 9.33%.
  2. Payout ratio is below 40% and has been consistently below 40% for 10 years.
  3. The company repurchased 9 million shares for $1.0 billion in 2015 and authorized an additional $2 billion in buybacks during Q4 2015. In the past decade, RTN reduced its share count by 34%!
  4. Analysts expect above average sales growth of 4.58%, with key drivers being RTN's Patriot missile defense system. Sales in 2016 are expected to be around $24 billion.
  5. With a diverse and ever-expanding product portfolio, RTN is well-positioned for future growth. Recent acquisitions in the intelligence, information and cyber warfare sector have made the company even more future proof
What do you think of RTN as a dividend growth stock? Please share your thoughts in the comments section below.


  1. An interesting tip for a good stock. A bit pricey stock at 126 a share I guess, but it has a nice dividend history. Thanks for sharing.

    1. Yes, you don't get a lot of shares for the dollars you spend -- that's for sure! Right now, RTN seems to be trading just about at fair value. I like buying shares at a discount of at least 5% to fair value, and preferably 10%. So I don't think I'll buy more shares right now!

      Thanks for commenting!


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