Dividend investors often face a tradeoff between yield and quality. The Best Dividend screen used by ChartMill tries to bridge that gap by requiring a high dividend rating while still demanding decent profitability and financial health. One company that passes those checks is NORTHROP GRUMMAN CORP (NYSE:NOC), a Falls Church, Virginia based defense and aerospace contractor with operations spanning advanced aircraft, space systems, and missile defense.
Screening for Dividend Quality
The Best Dividend screen is built around the ChartMill Dividend Rating, but it does not stop there. It also filters for stocks with a minimum ChartMill Profitability Rating of 5 and a minimum Health Rating of 5, ensuring that a stock is not just paying a high dividend, but is doing so from a reasonably sound financial position. Additional filters remove illiquid names and very low priced stocks.
Northrop Grumman scores well on those core requirements:
- ChartMill Dividend Rating: 7 out of 10
- ChartMill Profitability Rating: 7 out of 10
- ChartMill Health Rating: 5 out of 10
That combination makes the stock a plausible candidate for dividend focused investors, though the health score suggests some caution is warranted.
A Dividend Profile With Room to Grow
Northrop Grumman’s dividend rating is supported by a long and stable payout history. The company has paid a dividend for at least 10 years and has not reduced it during that period. Its dividend growth also stands out: the annual dividend growth rate is 9.61%, which is a solid pace for a large defense contractor.
The current dividend yield is 1.80%. That is not an outsized yield, but it is far above the industry average of 0.41%, and it puts Northrop Grumman in a strong position relative to its aerospace and defense peers. The payout ratio is also conservative, with 29.87% of earnings spent on dividends. That gives the company room to maintain the payout even if earnings come under pressure.
Key dividend metrics include:
- Yearly dividend yield: 1.80%
- Dividend growth rate: 9.61% annually
- Payout ratio: 29.87%
- Dividend history: paid for at least 10 years, no reductions
One caution from the fundamental report is that dividend growth has been outpacing earnings growth. That does not put the current dividend at immediate risk, but it does mean the pace of future increases may not be sustainable unless earnings growth accelerates. Investors who want to inspect the underlying data can review the full fundamental analysis report for a more complete picture.
Profitability Holds Up, Health Is the Watch Item
A dividend is only as reliable as the business behind it, and Northrop Grumman’s profitability metrics are generally strong. The company earns a profitability rating of 7 out of 10, supported by a return on equity of 25.14%, which outperforms 90.80% of its industry peers. Net margin comes in at 10.48%, and return on invested capital is 10.18%, both of which are respectable for the sector.
The health rating is lower, at 5 out of 10. The company’s current ratio of 1.17 and quick ratio of 1.06 are adequate on an absolute basis, but they trail most peers in the aerospace and defense industry. Debt to free cash flow is 4.17, which is manageable but not particularly low. The Altman-Z score of 3.08 points to a low near-term bankruptcy risk, so the balance sheet is not in distress, but the liquidity picture is worth monitoring.
The report also notes that return on invested capital is currently below the cost of capital. That is a sign that value creation is under pressure and a reminder that a solid dividend profile alone does not guarantee strong total returns.
Why This Matters for Dividend Investors
The Best Dividend screen is not designed to find the highest yielding stocks. Instead, it aims to identify companies that combine a reliable dividend with sufficient profitability and financial health. That is an important distinction for income investors, because a high yield can sometimes signal a falling share price or an unsustainable payout.
Northrop Grumman fits that philosophy reasonably well. Its dividend is not dramatic on a yield basis, but it is backed by a long track record, a conservative payout ratio, and strong profitability. The health concerns and the slowing earnings growth are valid risks, but they are not red flags that make the dividend look vulnerable in the near term.
For investors who want to run the same methodology and find more names with a similar balance of dividend quality, profitability, and health, the Best Dividend screen offers a convenient starting point.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »
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Northrop Grumman (NYSE:NOC): A Dividend Quality Pick for Income Investors
Dividend investors often face a tradeoff between yield and quality. The Best Dividend screen used by ChartMill tries to bridge that gap by requiring a high dividend rating while still demanding decent profitability and financial health. One company that passes those checks is NORTHROP GRUMMAN CORP (NYSE:NOC), a Falls Church, Virginia based defense and aerospace contractor with operations spanning advanced aircraft, space systems, and missile defense.
Screening for Dividend Quality
The Best Dividend screen is built around the ChartMill Dividend Rating, but it does not stop there. It also filters for stocks with a minimum ChartMill Profitability Rating of 5 and a minimum Health Rating of 5, ensuring that a stock is not just paying a high dividend, but is doing so from a reasonably sound financial position. Additional filters remove illiquid names and very low priced stocks.
Northrop Grumman scores well on those core requirements:
That combination makes the stock a plausible candidate for dividend focused investors, though the health score suggests some caution is warranted.
A Dividend Profile With Room to Grow
Northrop Grumman’s dividend rating is supported by a long and stable payout history. The company has paid a dividend for at least 10 years and has not reduced it during that period. Its dividend growth also stands out: the annual dividend growth rate is 9.61%, which is a solid pace for a large defense contractor.
The current dividend yield is 1.80%. That is not an outsized yield, but it is far above the industry average of 0.41%, and it puts Northrop Grumman in a strong position relative to its aerospace and defense peers. The payout ratio is also conservative, with 29.87% of earnings spent on dividends. That gives the company room to maintain the payout even if earnings come under pressure.
Key dividend metrics include:
One caution from the fundamental report is that dividend growth has been outpacing earnings growth. That does not put the current dividend at immediate risk, but it does mean the pace of future increases may not be sustainable unless earnings growth accelerates. Investors who want to inspect the underlying data can review the full fundamental analysis report for a more complete picture.
Profitability Holds Up, Health Is the Watch Item
A dividend is only as reliable as the business behind it, and Northrop Grumman’s profitability metrics are generally strong. The company earns a profitability rating of 7 out of 10, supported by a return on equity of 25.14%, which outperforms 90.80% of its industry peers. Net margin comes in at 10.48%, and return on invested capital is 10.18%, both of which are respectable for the sector.
The health rating is lower, at 5 out of 10. The company’s current ratio of 1.17 and quick ratio of 1.06 are adequate on an absolute basis, but they trail most peers in the aerospace and defense industry. Debt to free cash flow is 4.17, which is manageable but not particularly low. The Altman-Z score of 3.08 points to a low near-term bankruptcy risk, so the balance sheet is not in distress, but the liquidity picture is worth monitoring.
The report also notes that return on invested capital is currently below the cost of capital. That is a sign that value creation is under pressure and a reminder that a solid dividend profile alone does not guarantee strong total returns.
Why This Matters for Dividend Investors
The Best Dividend screen is not designed to find the highest yielding stocks. Instead, it aims to identify companies that combine a reliable dividend with sufficient profitability and financial health. That is an important distinction for income investors, because a high yield can sometimes signal a falling share price or an unsustainable payout.
Northrop Grumman fits that philosophy reasonably well. Its dividend is not dramatic on a yield basis, but it is backed by a long track record, a conservative payout ratio, and strong profitability. The health concerns and the slowing earnings growth are valid risks, but they are not red flags that make the dividend look vulnerable in the near term.
For investors who want to run the same methodology and find more names with a similar balance of dividend quality, profitability, and health, the Best Dividend screen offers a convenient starting point.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »