A detailed quantitative analysis by Raytheon Technologies Corporation (RTX) is linked here. Below are some highlights from the analysis linked above:
Company description: Raytheon Company, the world’s fifth largest military company, specializes in the manufacture of high-tech missiles, advanced radar systems and sensors, defense electronics, and anti-missile systems.
Fair value: When calculating the fair value, I take into account the NPV MMA Differential Fair Value together with these four calculations of the fair value, a detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham number
RTX trades at a premium to all four of the above ratings. Since the physical book value of RTX is not meaningful, a Graham number cannot be calculated. With the NPV-MMA differential also factored in, the stock trades at a premium of 115.6% to its calculated fair value of $ 40.07. RTX didn’t deserve any stars in this section.
Analytical data on dividends: There are three possible stars and three key metrics in this section, a detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4-year div. > 15%
RTX has earned a star for 2.) above in this section. The stock earned a star because its recent debt to total capital was less than 45%. The company has paid a cash dividend to shareholders every year since 1964 and has increased its dividend payments for 17 consecutive years.
Dividend Income vs. MMA: Why take the equity risk and invest in a dividend stock when you could get a better return with a much lower risk money market account (MMA) or a government bond? This section compares the earning power of this stock to a High yield MMA. In this section two points are considered, a detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. Years to> MMA
The NPV MMA Diff. the $ 158 is below the $ 1,800 target I’m looking for in a stock that has been raising dividends for as long as RTX has. If RTX increases its dividend by 3.8% per year, it will take 5 years to hit an MMA with an estimated 20-year average rate of 2.74%.
Peers: The company’s peer group includes: The Boeing Company (BA) with 0.0% yield, Lockheed Martin Corporation (LMT) with a yield of 2.8% and Northrop Grumman Corporation (NOC) with a yield of 1.7%.
Conclusion: RTX received no stars in the “Fair Value” area, one star in the “Dividend Analysis Data” area and no stars in the “Dividend Income vs. MMA” area, for a total of one star. This quantitatively classifies RTX as a 1 star very weak Warehouse.
Using my D4L-PreScreen.xls Model, I found that the stock price would have to drop to $ 38.79 before RTX’s NPV-MMA differential rose to the minimum of $ 1,800 that I’m looking for on a stock with 17 years of consecutive dividend increases. At that price, the stock would return 5.3%.
Resetting the D4L-PreScreen.xls The model and solution for the dividend growth rate required to achieve the target NPV MMA differential of $ 1,800, the calculated rate is 11.4%. This dividend growth rate is higher than the 3.8% used in this analysis and therefore does not offer a margin of safety. RTX has one Risk rating of 2.00, which rates it as a medium risk stock.
RTX has mixed dividend bases, including a free cash flow payout of 184% (down from 43% in the last review) and low total capital debt of 31% (down from 33%). The stock is currently trading at a premium to my calculated fair value of $ 40.07. The stock is one to keep an eye on, but based on yield and dividend fundamentals, I’m not buying one right now.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. This is generally never true. Before buying or selling stocks you you should do your own research and come to your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was long on RTX (5.1% of my dividend growth portfolio) and long on LMT. See a list of all of them my dividend growth portfolio holdings Here.
On the subject of matching items:
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Tags: RTX, BA, LMT, NOC,