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Raytheon(RTN - Get Report), one of the
top-yielding aerospace and defense stocks, develops and sells everything from missile systems to technical services to the U.S. government -- a business that generates almost 90% of the firm's annual sales. The balance comes from consulting and sales to smaller governments.
Like most of its peers, Raytheon has been plagued by the risk that Uncle Sam will look to trim his massive budget shortfalls by taking cash from the defense budget, a move that would be detrimental to defense contractors' revenues. At this point, however, those risks remain unsupported by Congressional action. With the U.S. military likely to remain actively engaged in conflict for the foreseeable future and many of Raytheon's offerings (like the Patriot missile system) consumable, the firm shouldn't face the revenue drop-off that some investors are envisioning.
Meanwhile, management is looking for ways to diversify revenues away from the defense department. One of the most successful has been international sales to allies, which have seen double-digit growth in recent years.
On Wednesday, management announced a 16.28% dividend increase, bringing Raytheon's payout to 50 cents per share. That eighth consecutive annual dividend hike puts RTN's yield at 3.3%, making the firm a solid option for a core income holding in the defense sector.
Raytheon shows up on a list of
JPMorgan's 24 Stocks That Are More Attractive Than Apple.