Dividend Investor Insights: Five Dividend-paying Defense Contractor Investments to Purchase
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Five Dividend-paying Defense Contractor Investments to Purchase
Five dividend-paying defense contractor investments to purchase provide powerful ways to profit from wars raging in the world.
The five dividend-payingdefense contractor investments to purchase feature four funds and a compelling company based in the Washington, D.C., area that equity research analysts of Chicago-based investment firm William Blair recently visited. All five dividend-paying defense contractor investments are worth considering seriously, market experts opined.
Demand is rising and staying strong for everything from submarines and space launch vehicles in defense to business jets in commercial aerospace, according to BofA Global Research. However, supply chain and capacity currently cause constraints.
Even though supply chain and labor have improved, BofA wrote in a recent research note that many defense companies still incur these issues as pain points.
Retired Pension Fund Chairman Praises Dividend-paying Defense Funds
Investors may want to consider dividend-paying exchange-traded funds (ETFs) focused on defense, said Bob Carlson, a former pension fund chairman who heads the Retirement Watch investment newsletter. Many of the investments Carlson recommends in his Retirement Watch newsletter feature ETFs.
Bob Carlson, who heads Retirement Watch, answers questions from Paul Dykewicz.
Five Dividend-paying Defense Contractor Investments to Purchase: PPA
The ETF with the highest returns over most time periods and that surged ahead of the others in the last year or so is Invesco Aerospace & Defense (PPA), which tracks the SPADE Defense Index, said Bob Carlson, who updates his recommendations each month in his Retirement Watch investment newsletter. The ETF pays a dividend yield of 0.60%. Many of the investments Carlson recommends in his Retirement Watch newsletter feature ETFs that he watches closely to update his favorites each month.
Roughly 89.2% of the fund is invested in the industrials sector, with technology accounting for 10.7%. The stocks in the fund tend to sell at lower valuations than the broad market indexes and pay higher dividends, Carlson said.
PPA recently owned 51 stocks, and 53% of the fund was in its 10 largest positions.
The top five positions were RTX (NYSE: RTX), Lockheed Martin (NYSE: LMT), Boeing (NYSE: BA), GE Aerospace (NYSE: GE) and General Dynamics (NYSE: GD). Each of the first four holdings composes more than 5% of the fund, while GD accounts for 4.93%.
PPA dipped 1.10% in the last month, rose 4.43% in the past three months, 11.84% for the year to date and 25.25% during the last 12 months. Its 10-year average annualized return is 13.21%.
The fund seeks to track the investment results, before fees and expenses, of the SPADE Defense Index. Generally, the fund invests at least 90% of its total assets in securities that comprise the underlying index. That index consists of common stocks of companies that are important to the defense sector and are involved with the development, manufacture, operation and support of U.S. defense, military, national/homeland security and government space operations.
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Five Dividend-paying Defense Contractor Investments to Purchase: XAR
Carlson also praised dividend-paying SPDR S&P Aerospace and Defense (XAR), an ETF designed to track the S&P Aerospace & Defense Select Industry Index. XAR recently had 32 equity holdings with 44% of the fund in the 10 largest positions, while paying a dividend yield of 0.54%.
The five largest XAR holdings, all greater than 4% of the fund, and their respective share of the fund's holdings, are: AeroVironment Inc. (NASDAQ: AVAV), 4.90%; Woodward Inc. (NASDAQ: WWD), 4.71%; Howmet Aerospace Inc. (NYSE: HWM), 4.61%; HEICO Corp. (NYSE: HEI), 4.53%; and RTX Corp. (NYSE: RTX), 4.40%.
The dividend-paying fund has been relatively flat in the past month, dipping 0.64%, while rising 1.59% in the last three months, 4.3% year to date, 17.93% for the past year and an average 11.77% annually for the past 10 years.
Five Dividend-paying Defense Contractor Investments to Purchase: GCAD
The third of five dividend-paying defense contractor investments to purchase is Gabelli Commercial Aerospace & Defense (GCAD). The ETF has been open only since early 2023, so its track record is still developing.
Like other Gabelli funds, GCAD is actively managed and does not try to track an index, Retirement Watch leader Carlson told me. GCAD invests in income-producing securities in defense, aerospace and aviation.
Recently, about 95% of the fund was in the industrials sector and the other 5% was in technology. It recently owned 26 stocks and had 63% of the fund in the 10 largest positions.
The five biggest holdings at last check were Moog (NYSE: MOG:A), Boeing (NYSE: BA), Spirit Aerosystems Holdings (NYSE: SPR), Ducommun (NYSE: DCO) and Curtiss-Wright (NYSE: CW). The fund's dividend yield is 0.9%.
Five Dividend-paying Defense Contractor Investments to Purchase: ITA
Carlson counseled that the lowest fees among the four defense funds are charged by iShares US Aerospace & Defense (ITA), which seeks to track the Dow Jones U.S. Select Aerospace and Defense Index. ITA is 100% invested in the industrials sector.
The fund recently owned 38 securities, and its 10 largest positions were 77% of the portfolio.
Top positions in the fund recently were RTX (NYSE: RTX), Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), Howmet Aerospace Inc. (NYSE: HWM) and TransDigm Group (NYSE: TDG).
ITA is up 4.55% over the last four weeks, 8.60% over three months, and 22.35% over the last 12 months. Its 10-year average annual return is 10.67%. The dividend yield is 0.89%.
Five Dividend-paying Defense Contractor Investments to Purchase: BAH
Booz Allen Hamilton (NYSE: BAH), a McLean, Virginia-based recommendation from the Chicago-based investment firm William Blair, traded up after reporting fourth-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) above consensus analysts' estimates during late May. The dividend-paying defense stock's management issued its fiscal 2025 guidance above consensus on the strength of its pipeline of opportunities and hiring trends offset by potential election and geopolitical disruptions.
Booz Allen's artificial intelligence (AI) and machine learning (ML) Databricks partnership for the Advana platform has been a major growth driver, DiPalma wrote in a recent research note. The industry continues to benefit from a strong 2023 defense budget, a favorable hiring environment and wage inflation, he added.
"Headcount trends and strong bookings will likely continue to be the main drivers of revenue growth, and both are in the firm's favor," DiPalma wrote. "Over the past few years, Booz Allen has won elite contracts for cybersecurity (Thunderdome, CDM DEFEND, CyPrESS), data analytics (Advana, CDC DMA), artificial intelligence (EMAPS, the JAIC, Space Force remote sensing), and augmented reality (Army digital soldier, soldier as a service). We view the stock as artificial intelligence at a reasonable price (AARP) and see upside of greater than 15% over the next year."
Another fan of Booz Allen Hamilton is Jim Woods, a former Army paratrooper who has recommended the company profitably in the past. Woods has a big defense contractor in the Income Multipliers portfolio of his Successful Investing newsletter but he also likes Booz Allen Hamilton.
As a former military man, Woods has a keen interest in defense and cyberspace, following them closely for subscribers of his Successful Investing newsletter and his trading services such as Bullseye Stock Trader, High Velocity Options and Fast Money Alert. The latter service he co-heads with Mark Skousen, PhD, an economist who is a Presidential Fellow at Chapman University, as well as the head of the Forecasts & Strategiesinvestment newsletter.
Ben Franklin scion Mark Skousen, head of Forecasts & Strategies, talks to Paul Dykewicz.
Five Dividend-paying Defense Contractor Investments to Purchase Shine
Subscribers of Bullseye Stock Trader collected a profit of 21.67% in 2019 when Woods recommended the stock for slightly more than three months. He also recommended related call options in Bullseye Stock Trader that produced a profit of 166.67%.
Fast Money Alert subscribers gained 9.59% after only about a month late in 2022 with a follow-up recommendation of Booz Allen Hamilton. A related call option recommendation in Fast Money Alert for Booz Allen Hamilton produced a 239.27% profit in less than one month.
Bryan Perry, who leads the Cash Machine investment newsletter, generated a 25% gain for his subscribers in the Breakout Options Alert advisory service in less than three weeks last May.
Michelle Connell, owner and president of Dallas-based Portia Capital Management LLC, also favors Booz Allen Hamilton. Focused on wealth management for private investors and non-profit institutions, Connell advised that the company has "robust fundamentals" and has generated more than a half billion dollars in free cash flow every year for the last 10 years. Its return on equity is well over 50%, she added.
Plus, the company's revenue growth is in excess of 15% a year. Expect this to increase given the demand for AI-related consulting services, Connell continued.
The stock's dividend yield of 1.28% likely will increase, given the amount of demand for AI ,as well as its strong free cash flow, she added. Plus, there is no short interest in the stock, adding that means no one is willing to go against BAH and its stock performance, Connell concluded.
Five Dividend-paying Defense Contractor Investments to Purchase Amid Wars An enhanced alliance between Russia and North Korea is adding additional risk to the ongoing wars in the world. Experts speculate China's leaders likely are worried about a potential loss of influence over North Korea after its leader Kim Jong Un and Russian President Vladimir Putin signed a pact this week, according to the Associated Press.
The alliance not only will give Russia additional access to arms and military equipment as it continues its invasion of Ukraine, but it could increase instability on the Korean Peninsula. China's leaders now face what could be the strongest Russia-North Korea partnership since the Cold War.
The increased drama comes as the Middle Eastern conflict in Gaza between Israel and Hama shows no end in sight, while Russia keeps trying to gain further ground in Ukraine. To aid in Ukraine's defense against Russia's unrelenting attack, Western governments have been supplying additional arms and equipment, as well as allowing some of it to be used against military targets that previously had been declared off-limits.
The five dividend-paying defense contractor investments to purchase are on the rise as demand for military equipment climbs. Investors who want investments poised to advance can purchase them and try to protect freedom at the same time.
Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul also is the author of an inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain", with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.
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