How Does General Dynamics Corporation (NYSE:GD) Fare As A Dividend Stock?

There is a lot to be liked about General Dynamics Corporation (NYSE:GD) as an income stock, over the past 10 years it has returned an average of 2.00% per year. The company currently pays out a dividend yield of 1.95% to shareholders, making it a relatively attractive dividend stock. Let's dig deeper into whether General Dynamics should have a place in your portfolio. Check out our latest analysis for General Dynamics

5 questions to ask before buying a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?
• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
• Has dividend per share amount increased over the past?
• Does earnings amply cover its dividend payments?
• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How does General Dynamics fare?

The current trailing twelve-month payout ratio for the stock is 34.85%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect GD's payout to fall to 30.89% of its earnings, which leads to a dividend yield of around 2.10%. However, EPS should increase to $11.44, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. GD has increased its DPS from $1.4 to $3.72 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes GD a true dividend rockstar.

Relative to peers, General Dynamics has a yield of 1.95%, which is high for Aerospace & Defense stocks but still below the market's top dividend payers.

Next Steps:

Keeping in mind the dividend characteristics above, General Dynamics is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. There are three key factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for GD’s future growth? Take a look at our free research report of analyst consensus for GD’s outlook.
2. Valuation: What is GD worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GD is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.