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:

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

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%.

Transactions

2014-01-03	Bought: 11 shares of RTN at $89.35 per share:	$	982.88
2014-05-01	Dividend on 11 shares at 60.5¢ per share:	$	6.66
2014-08-07	Dividend on 11 shares at 60.5¢ per share:	$	6.66
2014-10-30	Dividend on 11 shares at 60.5¢ per share:	$	6.66
2015-02-05	Dividend on 11 shares at 60.5¢ per share:	$	6.66
2015-04-30	Dividend on 11 shares at 67.0¢ per share:	$	7.37
2015-08-06	Dividend on 11 shares at 67.0¢ per share:	$	7.37
2015-11-12	Dividend on 11 shares at 67.0¢ per share:	$	7.37
2016-02-04	Dividend on 11 shares at 67.0¢ per share:	$	7.37
2016-02-19	Bought: 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-   Dividend.com'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 finbox.io, 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.