While President-elect Donald Trump is expected to increase defense spending, that's not why the firm raised its rating on this defense stock, Stifel Director Joseph DeNardi said on CNBC's "Halftime Report" on this afternoon.
"I think we'd be doing this even without Trump winning. I think what gets us more comfortable is really the outlook for free cash flow," he explained. Free cash flow over the past few years has looked good for defense stocks and that's expected to continue over the next three years.
"This is a company that I think can grow the dividend 10% a year and buy back 2% to 3% of its market cap a year. So that's what gets us comfortable with it going forward," DeNardi explained.
While this call would have been made regardless of who won the election, Trump does add "some upside potential" to the stock, DeNardi added.
The biggest beneficiary of increased defense spending will be Lockheed Martin, Northrop Grumman (NOC) and Raytheon (RTN), he predicted. Lockheed in particular should see a boost because its F-35 aircraft is "clearly one of the bigger priority programs at the DOD."
(Lockheed Martin is a holding in David Peltier's Dividend Stock Advisor.)
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation: