Smart Dividend Portfolio Edition #52: Arsenal of Returns
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Dear Investor,
Welcome to the 52 nd edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: March 17, 2025
Stocks jumped on Friday but still closed the week with steep losses. The Dow Jones Industrial Average (DJIA) declined by 3.07%, marking its worst week since March 2023, while the S&P 500 (SPX) lost 2.27%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) dropped 2.43% and 2.47%, respectively. All major indexes are now deep in the red year-to-date.
Thursday’s market bloodbath saw the S&P 500 joining the Nasdaq Composite and the Nasdaq-100 in the correction territory, while the blue-chip DJIA stopped short of a correction, falling just over 9% from its all-time high. It took less than a month for the S&P 500 to drop 10% from its peak, making it the fifth-fastest correction in the past 75 years.
However, markets strongly rebounded on Friday, capping off their best day since November, as the reduced risk of a government shutdown prompted investors to “buy the dip” after Thursday’s brutal sell-off. Investors cheered the news that Senate Democrats backed off a threat to block a funding bill aimed at averting a shutdown. Meanwhile, the absence of fresh tariff headlines from the White House offered further relief, proving that in this case, “no news is good news.”
Large-cap tech stocks that led the declines over the past month spearheaded the rebound rally on Friday, with Nvidia surging over 5% and leading the Magnificent Seven higher. The S&P 500 and both Nasdaq indexes posted their best day since January 6th, the post-election rally. Several leading Wall Street strategists argued that last month’s sell-off was a correction, not the start of a bear market, encouraging investors to buy beaten-down stocks at cheaper valuations.
Last week was brutal for stocks, capping the S&P 500’s longest losing streak since August. The market suffered as President Trump’s abrupt tariff announcements rattled sentiment. Wednesday saw a brief reprieve after encouraging inflation data, with February’s CPI coming in below expectations. Additionally, the PPI report, which feeds into the Fed’s preferred inflation gauge, Core PCE, also came in weaker than expected, pointing to further disinflation at the wholesale level.
However, trade war fears quickly overshadowed these positives as concerns grew that tariffs could stall the disinflationary trend while harming economic growth. As if on cue, the University of Michigan’s Consumer Sentiment Index extended its three-month slide, dropping to its lowest level since November 2022. Consumers have been rattled by tariff-related uncertainty, with the latest developments only adding to the gloom.
President Donald Trump has threatened a 200% tariff on European alcoholic beverages following the EU’s retaliatory levies on U.S. imports, which include a 50% tariff on American whiskey. This followed Trump’s announcement of 25% tariffs on steel and aluminum, further escalating trade tensions with Europe. Meanwhile, the President slapped a 50% levy on Canadian steel and aluminum, in response to Canada’s retaliatory 25% tariff on U.S. electricity exports.
With tariffs being imposed across the board and recession fears resurfacing, economists are now forecasting lower growth and higher inflation than they did just three months ago. This puts the Federal Reserve in a tough spot, as core inflation remains well above its target, while tariff uncertainty clouds the economic outlook even further.
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This Week’s Quality Dividend Stock Idea
General Dynamics (GD) is an American aerospace and defense company specializing in the design, manufacturing, and integration of advanced military and commercial systems. Its vast operations span combat vehicles, shipbuilding, aerospace, and information technology solutions for defense and government agencies. GD is one of the largest U.S. defense contractors and a key supplier of military aircraft, submarines, and cybersecurity solutions.
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Defense by Design
General Dynamics traces its origins to the 1952 merger of Electric Boat Company, a pioneer in submarine manufacturing, and Convair, a leading aircraft producer. This foundation set the stage for its rise as a dominant force in aerospace and defense. Early expansion efforts, including the acquisition of Canadair, solidified its presence in both military and commercial aviation.
During the Cold War, GD capitalized on rising defense budgets, securing major contracts for submarines, fighter jets, and land combat systems. The 1980s saw a breakthrough with the F-16 Fighting Falcon, now one of the most widely used fighter jets worldwide. Around the same time, the acquisition of the M1 Abrams tank program further strengthened its land defense portfolio.
In the 1990s, General Dynamics refocused on core defense capabilities, divesting from commercial aviation assets like Convair and Cessna. This strategic shift enabled reinvestment in high-margin military technologies, fueling long-term earnings growth. A pivotal moment came in 1999 with the acquisition of Gulfstream Aerospace, marking a return to business aviation and adding a lucrative revenue stream.
In the 2020s, GD continued to secure long-term contracts for nuclear submarines, space systems, and next-generation combat vehicles. Investments in digital modernization and autonomous systems reinforced its position as a leader in defense and aerospace technology. General Dynamics has strategically expanded through targeted acquisitions. The $9.7 billion buyout of CSRA in 2018 strengthened its government IT services segment, particularly in cloud computing and AI-driven defense applications. That same year, the $250 million acquisition of Hawker Pacific enhanced its aviation maintenance, repair, and overhaul (MRO) capabilities while expanding its presence in the Asia-Pacific and Middle Eastern markets. The 2019 acquisition of German armored vehicle specialist FWW Fahrzeugwerk in 2019 further bolstered its combat systems division, diversifying its defense portfolio.
Today, GD is a top U.S. defense contractor with a market capitalization of $69.8 billion with annual revenues of $47.7 billion and a Fortune 500 ranking of #105.
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Fortifying the Future
General Dynamics operates a diversified business model across four key segments—Aerospace, Marine Systems, Combat Systems, and Technologies—ensuring a stable mix of defense contracts and commercial sales. This structure supports steady revenue growth, backed by a strong backlog and disciplined cost management.
Approximately 70% of revenue comes from the U.S. government, positioning General Dynamics favorably—even in light of the proposed defense spending cuts over the next five years. These reductions are expected to target inefficiencies rather than core defense programs, minimizing their potential impact. The Aerospace segment, led by Gulfstream and Jet Aviation business units, generates substantial revenue through the sale of high-performance business jets and aftermarket services. With a strong order backlog and rising private aviation demand, Gulfstream remains a steady cash flow driver.
The Marine Systems segment is a major earnings contributor, anchored by long-term U.S. Navy contracts for nuclear-powered submarines and surface combatants. The Columbia-class and Virginia-class submarine programs serve as cornerstone projects, providing revenue visibility for the next decade. The Columbia-class ballistic missile submarine, a 12-boat program, is the Navy’s top acquisition priority and is set to deliver its first vessel in 2028. Congressional support further solidifies General Dynamics’ position in naval defense. A newly passed continuing resolution allocated $9 billion for Columbia-class construction and $5.7 billion for Virginia-class programs, directly benefiting the company’s Electric Boat division. These funds help stabilize the supply chain, ensuring steady production of both submarine classes. Additionally, Electric Boat recently secured a $35 million contract for Virginia-class submarines, set for completion by December 2027.
The Combat Systems segment manufactures key land defense assets, including the M1 Abrams tank and Stryker combat vehicle, benefiting from modernization programs and international defense contracts. The Technologies segment provides IT and cybersecurity solutions to government agencies, offering a high-margin, recurring revenue stream.
Looking ahead, General Dynamics is expected to benefit from rising European defense spending. Analysts estimate that a 0.5% increase in NATO defense budgets could add $115 billion in total funding. With established European partnerships, GD is well-positioned to capture a share of these contracts.
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Earnings on Target
General Dynamics has delivered steady financial performance over the past five years, with revenue growing at 3.9% CAGR and earnings at 2.6%. Growth has been driven by a strong order backlog, rising demand for Gulfstream jets, and increased global defense spending. Operational efficiency, margin expansion, and strategic acquisitions like CSRA have further boosted profitability. In Q4 2024, GD’s EPS rose 14% YoY to $4.15, beating estimates of $4.07. Revenue increased 14.3% YoY to $13.3 billion, surpassing expectations of $12.8 billion. For FY24, revenue grew 12.9% to $47.7 billion, with EPS up 13.4% to $13.63. GD ended the year with a $90.6 billion order backlog, reinforcing long-term earnings visibility.
The Aerospace segment, accounting for nearly 25% of revenue, posted revenue growth of 30.5% YoY in FY24. Operating income grew 23.9%, with a 70-bps margin decline due to early certification and delivery costs for the G700 jet. The company delivered 30 G700 jets, below its 50-52 target, due to engine shipment delays. With these issues resolved, GD expects deliveries to meet targets in FY25. The segment secured $3.8 billion in Q4 orders, ending the year with a $19.7 billion backlog.
Looking to FY25, GD expects revenue of $50.3 billion (+5.5% YoY) and an operating margin of 10.3% (+20 bps), supporting a projected EPS of $14.80. This guidance excludes potential share repurchases, which could boost EPS.
GD remains committed to capital efficiency, targeting a 100% cash conversion rate. Free cash flow in FY24 was $3.2 billion, with an 85% cash conversion rate—down from 115% in FY23 due to higher Gulfstream inventories.
Despite a debt-to-equity ratio of 0.48, above the industry median, GD maintains financial strength. S&P Global upgraded its credit rating to ‘A’ from ‘A-,’ while Fitch reaffirmed its ‘A’ rating. Return metrics remain strong: ROIC rose to 13.2% in FY24 (from 12.3%), far exceeding the industry median of 3.76%. ROE and ROA rank among the top 20% in the industry.
With a strong backlog, disciplined cost management, and strategic investments in next-generation defense and aerospace technologies, GD remains well-positioned for sustained growth.
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Returns Built to Last
General Dynamics has demonstrated a strong commitment to shareholder returns, earning its place as a Dividend Aristocrat with 27 consecutive years of dividend increases. Over the past decade, the company has raised its dividend at an annual rate of 8.5%, reflecting steady financial growth and a disciplined capital allocation strategy. Its 2.25% dividend yield—well above the industry average—further enhances its appeal to income-focused investors. Strong financials and moderate payout ratios support expectations for continued dividend growth. In Q4 2024, GD returned 95% of its free cash flow to shareholders, repurchasing 4.8 million shares for $1.3 billion and distributing $389 million in dividends. This underscores the company’s commitment to shareholder value.
General Dynamics continues to prioritize shareholder value through strategic capital allocation. The company’s Board of Directors authorized a stock buyback program of up to 10 million shares last year, reinforcing its confidence in long-term growth. As of December 31, 9.2 million shares remained available for repurchase, accounting for approximately 3.4% of GD’s total outstanding shares.
GD’s shares have returned about 2% in the past year, underperforming its peers due to Aerospace segment challenges and cost pressures in Navy shipbuilding, weighing on analyst sentiment. This stock underperformance has driven down its valuation, with GD now trading at a discount to its sector on a GAAP basis. Moreover, the stock sits towards the bottom of the peer valuation table, suggesting room for upside. Additionally, discounted cash flow models indicate that the stock is undervalued by approximately 34%, further highlighting its attractiveness as a value investment.
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Investing Takeaway
General Dynamics’ strong backlog, consistent revenue growth, and disciplined cost management make it a compelling long-term investment in the defense and aerospace sectors. With increasing global defense spending, robust demand for Gulfstream jets, and strategic contracts like the Columbia-class submarines, GD offers earnings stability and growth potential. The company’s improving margins, strong free cash flow, and favorable credit ratings further reinforce its financial strength. While near-term challenges like supply chain constraints persist, GD’s long-term outlook remains solid, making it an attractive option for investors seeking exposure to the defense industry.
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Dividend Investor Portfolio
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Portfolio News
▣ Allianz SE (ALIZY) could be in discussions to acquire Viridium, an insurance policy consolidator in a deal valued at $3.3 billion, strengthening its domestic operations, according to reports. A Wall Street Journal report stated that Allianz has outbid rival bidders including Athora, an insurer affiliated with Apollo Global Management, in the race for Viridium.
▣ In a win for Amgen (AMGN), a Federal Circuit court upheld a lower court’s decision denying a temporary block on Amgen’s biosimilar of Regeneron’s Eylea, a drug used to treat eye diseases like macular degeneration, macular edema and retinopathy. Biosimilars, like generics for biologics, are similar but not identical to the original drugs. Last year, Regeneron sued Amgen for infringing multiple Eylea-related patents.
▣ JPMorgan’s (JPM) quant unit has built a $100 billion derivatives-driven trading book, according to Bloomberg. This unit offers low-cost, hedge fund-like investing strategies. Its Strategic Indices business leads in Quantitative Investment Strategies, simplifying systematic trades into swaps or structured notes.
▣ Kroger’s (KR) announced the launch of a new e-commerce unit to enhance the online customer experience. This unit will be led by Yael Cosset as EVP and Chief Digital Officer, effective immediately. The retailer’s CEO Ron Sargent emphasized that “accelerating Kroger’s eCommerce growth is a top priority.”
▣ PepsiCo (PEP) could be close to acquiring the “healthier” soda brand Poppi for $1.5 billion. According to Bloomberg, the beverage giant scrapped plans for its own healthy soda, Soulboost, after early signs that it was unlikely to succeed.
▣ The ex-dividend date for Philip Morris (PM) is March 21st, with the payment date coming on April 4th. In other company news, Philip Morris’ Canadian affiliate, RBH, has secured court approval for a settlement plan resolving all tobacco-related claims in Canada against RBH and its affiliates. RBH, Imperial Tobacco, and JTI-Macdonald will pay a settlement of C$32.5 billion ($22.7 billion) through upfront and annual payments. The plan, expected to take effect in 2025, keeps RBH deconsolidated under U.S. GAAP.
▣ The ex-dividend date for VICI Properties (VICI) is March 21st, with the payment date coming on April 4th.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.94% | +8.06% | $5,879.93 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.60 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.56% | $20.84 |
| Bank of Nova Scotia (BNS) | Apr 01, 2025 | Apr 28, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
