The Top 5 Defense Stocks to Invest in 2012

With two wars winding down and the Pentagon facing the prospect of a half-trillion dollars in budget cuts over the next decade, it’s no wonder it’s white-knuckle time for the nation’s largest defense contractors. And since these stock market titans are tucked into a lot of portfolios, many investors could be little squeamish, too.
But the sky is not falling, and there are still a few bright spots among top defense stocks.

Sunoco’s Buyout Could Boost Pump Prices
The best place to start is with the Pentagon’s biggest contractors as ranked by Deloitte in a report released in April. The top five are Boeing (NYSE:BA), Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD), Northrop Grumman (NYSE:NOC) and Raytheon (NYSE:RTN).
For a comprehensive breakdown of the defense/aerospace industry, check out this expert analysis by InvestorPlace’s Hilary Kramer. As she points out, the expected defense cuts haven’t hit these stocks too hard — a theme that played out in the companies’ quarterly earnings reports last week.
Here’s our breakdown of last week’s earnings, the good and the bad of these defense-sector Goliaths and our verdict on which ones should soar and which could sink.

The Top 5 Defense Stocks to Invest in 2012 #1 Boeing

With $68.7 billion in revenue last year, BA is the defense/aerospace industry’s top gun. All of the key metrics rose for Boeing last year: Revenue was up nearly 7%, operating profit grew by 17.6% and margin growth was 10%. Share price and market cap grew by 12.4% and 13.9%, respectively.
Earnings: Boeing was the belle of the ball in last week’s defense/aerospace earnings parade. First-quarter profit rose a whopping 58%, to $922 million ($1.22 a share), on the strength of its robust commercial-airplane business. Revenue also rose by 3% in the quarter, to nearly $19.4 billion.
Good: Boeing is selling a lot of commercial airplanes, including the $6 billion deal announced Monday to sell 20 777 jets to China Eastern Airlines. Boeing creatively agreed to buy five Airbus A340s from China Eastern to seal the deal. The company delivered 137 commercial aircraft in the first quarter, versus 104 in the same quarter last year. Another big bright spot: BA has racked up 300 orders for the new, re-engined 737 MAX, which will compete head-to-head with Airbus’ fuel-efficient A320neo.
Bad: The biggest potential problem for Boeing in the short term remains the impact of high fuel prices on airlines and the economic challenges in Europe. Although the much-delayed 787 Dreamliner is getting back on track, costs remain high.
In the defense sector, BA could face pretax losses of $317 million in a rocket-reimbursement dispute, according to Space News.
Stock: With a market cap of $58 billion, BA is trading at around $77.50, about 37% above its 52-week low last August. The stock has a price-to-earnings-growth (PEG) ratio of 1.5, suggesting it may be oversold. Its forward P-E of over 13 is a little higher than many companies in this sector, and its current dividend yield of 2.3% is a little lower.
Verdict: BA’s success was due to strong deliveries in its commercial-airplanes unit, not to its federal government contracting business, making it the most insulated of the Big 5 to massive defense cuts. Even though it’s a little more expensive than I’d prefer right now, I like BA on the strength of its global commercial-aircraft sales growth — if it can produce the 737 MAX without repeating the delays and glitches that bedeviled the 787 and 747-8. The company also must keep production and deliveries on track with those models. While I rank BA a buy now, I wouldn’t pursue it too ardently — my comfort level would end around $82.

The Top 5 Defense Stocks to Invest in 2012 #2 Lockheed Martin

As the largest defense-industry pure play, Lockheed Martin‘s (NYSE:LMT) $46.5 billion in revenue last year places it solidly in second place, but its metrics are less attractive than Boeing’s. Although the share price grew 15% and market cap rose by 4%, revenue was flat. Operating margin fell by 1.7% in 2011.
Earnings: LMT beat the Street last week with $688 million in profit ($2.03 a share) on $11.3 billion in revenue. Last year’s first-quarter earnings were $530 million ($1.50), and analysts had expected earnings of $1.70 a share on $10.6 billion in revenue.
Good: The company already has reduced overhead costs by $1.2 billion. It removed 1.5 million square feet of facilities space from 2010 to 2011 and plans to remove nearly 3 million more square feet of space by 2014. Margins for LMT’s electronic systems were 15% in the first quarter, particularly in its missiles and fire-control systems.
Bad: LMT is the prime contractor on the delay- and cost-overrun-plagued F-35 Joint Strike Fighter. In March the Pentagon announced that it will delay delivery of 179 of the planes for five years. Japan, which has placed orders for 42 of the fighter jets, said earlier this year it will cancel the deal if there are any delivery delays or price increases.
Stock: With a market cap of $29.5 billion, LMT is trading at around $91, 37% above its 52-week low last August. It has a PEG ratio of nearly 1.7, indicating that it may be overvalued. It has a forward P-E of about 11 and an attractive current dividend yield of 4.4%.
Verdict: In good times it’s a boon to investors that LMT has its fingers in a lot of pots. But with the defense sector’s many challenges, it seems more like those fingers are just trying to plug holes in the dike. LMT is front and center in a lot of high-profile, potentially endangered defense contracts, including the F-35 and the Littoral Combat Ship.
The company has non-defense federal customers, too: the FAA, NASA, National Security Agency and the Energy Department, but their budgets will be cut, too. Still, Lockheed is doing a very good job of cutting costs so far. If you’re in LMT now, I’d hold, but keep a very close eye on two things: the sequestration debate and whether Japan cancels its F-35s. Either of those events could mean danger for LMT.

The Top 5 Defense Stocks to Invest in 2012 #3 General Dynamics

General Dynamics (NYSE:GD) had $32.7 billion in revenue last year, but year-over-year growth was flat, while profit and margins declined by 3%. GD’s share price slipped more than 6%, and its market cap fell by nearly 12%. The company’s aerospace, combat and marine-systems businesses, in particular, were challenged in 2011.
Earnings: GD’s first-quarter earnings missed analysts’ estimates on the top and bottom lines. Net income in the first quarter fell to $564 million ($1.57 a share) on revenue of nearly $5.6 billion. Wall Street expected revenue of $7.9 billion and an EPS of $1.69. For the same quarter last year, GD reported net income of $618 million ($1.64 a share).
Good: General Dynamics’ best prospects are in its Gulfstream business jet unit, which grew first quarter sales by 20% and profit by 18%. The company has an opportunity in the Marine Systems unit with the Navy’s potential order of 9 DDG-51 Destroyers and 9 Virginia-class nuclear attack submarines.
Bad: Income fell 27% in the combat-systems unit, which produces the Abrams battle tank, and 21% in its information systems and technology unit. Europe has been fraught with challenges for GD, causing the company to take a $67 million non-cash charge. The Defense Department’s fiscal 2013 budget will slash $800 million from GD’s Advanced Global Hawk drones program. GD also is a subcontractor on LMT’s vulnerable F-35.
Stock: With a market cap of $24.7 billion, GD is trading at around $68.50, about 27% above its 52-week low last September. It has a PEG ratio of 1.5, an attractively low forward P-E of 9 and a current dividend yield of 3%.
Verdict: Once again, commercial-airplane sales could be the silver lining in the cloud of looming federal budget cuts. While it won’t help GD soar nearly as high as Boeing, the business-jet niche, in particular, should help offset some of the forecast declines in other businesses.
I’m not confident that GD will get all nine of the Virginia-class submarines it’s hoping for. At $2 billion a pop, it’s too juicy a budget target right now, which could mean a cut in procurement levels to five — or even four — and delayed delivery. This is another of my “hold for now, but watch closely” stocks. With GD, I’d keep an eye on Europe and see if second-quarter earnings show further deterioration in margins.

The Top 5 Defense Stocks to Invest in 2012 #4 Northrop Grumman

Northrop Grumman (NYSE:NOC) experienced a 6% drop in revenue, to $26.4 billion, in 2011, but aggressive cost management and a high percentage of flexibly priced long-term contracts boosted last year’s profit by nearly 16%, and margins grew by a robust 23.5%. Share price and market cap fared badly, however, falling by nearly 10% and 19%, respectively. Shipbuilding and aerospace operations have been among the most pressured.
Earnings: NOC’s first-quarter earnings nosed up about 2%, to $506 million ($1.96 a share), as the company’s cost-cutting initiatives managed to offset revenues that were $500 million lower than last year.
Good: Cost-cutting is a huge priority at NOC, so it hopes to boost margins through layoffs and other measures. The company also could benefit from a growing commercial market for unmanned drone aircraft, particularly for police departments.
Bad: Northrop was particularly hard hit by budget cuts on LMT’s F-35 Joint Strike Fighter and Boeing’s F/A-18 Hornet. The company is a major subcontractor on both programs. Even more challenging: Sales have slipped in NOC’s aerospace, technical and information-services units.
Stock: With a market cap of nearly $16 billion, the stock is trading at around $63.50, nearly 30% above its 52-week low last August. It has a PEG ratio of about 2.5, making it appear significantly overvalued compared with its peers. NOC also has a forward P-E of 9 and a current dividend yield of 3.1%.
Verdict: NOC has some outstanding and sophisticated approaches to cybersecurity at a time when Congress is moving legislation ahead that could foster a war on cyber threats. That’s why I’m concerned that sales are down in Northrop Grumman’s information-services unit. The obstacles facing other divisions are even more challenging. Cost-cutting and layoffs will help, but the company could be forced to cut intellectual muscle that it will need once the sector rebounds. I love this company, but I hate the stock right now — I rank it a sell, at least in the short term.

The Top 5 Defense Stocks to Invest in 2012 #5 Raytheon

Raytheon‘s (NYSE:RTN) revenue was flat last year at $24.8 billion, but it still managed to grow profit by nearly 10% and margins by 11%. The missile and integrated-defense-systems company, which also is on a quest to purge waste from its operations, saw a 4% increase in its share price last year, though its market cap stayed about the same.
Earnings: RTN’s first-quarter earnings soared on missile sales and the deployment of advanced-information technology to boost productivity. Profit grew by 17%, to $448 million ($1.33 a share), on sales of $5.9 billion. The company raised its full-year guidance to $5.00 to $5.15 from its earlier estimate of $4.90 to $5.05.
Good: Raytheon’s strong position in international markets — 25% of total first-quarter sales were to non-U.S. customers, particularly in the Middle East and Asia. Large radars and air- and missile-defense systems were strong. Profit in the company’s integrated-defense-systems unit, which includes the Patriot and Aegis weapon systems, rose more than 11% in the quarter. Cyber security spending also is giving a boost to RTN’s intelligence and information systems.
Bad: Network-centric operations sales and traditional sales of Army products have slipped. And as with all defense contractors, the possibility of “sequestration” — across-the-board automatic defense cuts set to take effect in January 2013 — will have a huge impact on U.S. federal sales.
Stock: With a market cap of $18.2 billion, RTN is trading at around $54.50; it set a new 52-week high last week. It has the best PEG ratio in this group at 1.2, indicating that the stock is fairly valued. RTN has a forward P-E of about 10 and a current dividend yield of 3.7%.
Verdict:  The company has repurchased nearly 8 million shares and is raising its dividend by 16%, to $2. RTN is doing a lot of the right things, including cultivating a strong international presence and solid positioning in the cyber-security and missile-systems area.
Fundamentals are good compared with most of its peers. I like Raytheon’s margin growth as well as the dividend yield. RTN could be a buy now, though I wouldn’t jump in much higher than $58. Since it just hit a new 52-week high, I might wait to try to buy it on a dip.

Top 5 Stocks Must to Sell in May in 2012

You’ve probably heard the adage “sell in May and go away.” It’s a nice little rhyme, and it does have a basis in the market’s seasonal patterns. Over time, the stock market as a whole has typically been weaker from May to October than it has from November through April. Going back to 1950, the Dow is just about flat May to October but up over 7% on average from November to April.
On the other hand, that’s certainly not the pattern every year, and bailing out of stocks altogether for such a long period of time is tricky. For one thing, you have to figure out the right time to get back in. And this year in particular, there’s another historical trend at work that muddies the waters: the Presidential election. Going back to 1950, the S&P 500 has moved higher in the last seven months of Presidential election years 13 out of 15 times, according to Stock Trader’s Almanac.
Also important, first-quarter earnings-reporting season, which lingers into May, has been solid so far, with nearly three-quarters of companies beating expectations. In addition, housing, which was the biggest cause of our economic problems, looks close to bottoming out, European debt contagion risks remain largely contained at the moment, and anemic interest rates are supportive of demand for stocks — many of which pay higher dividend yields than CDs, savings accounts and bonds.
My strategy is simple: I like to make sure I’m properly diversified and that my portfolio is in balance with my desired allocations. I also make sure the stocks I own are the strongest opportunities with specific catalysts in place to drive the stocks higher.
That said, “sell in May” isn’t a bad way to go for stocks you’re not sure about. As an example, let me share a few of the stocks on a list I just put together for subscribers to my GameChangers advisory service.
Many of these stocks have shrinking margins, bleak revenue outlooks, face increased competition and could be affected by a cautious consumer as well. At best, I expect them to be dead money for a long time; at worst, they could drag your portfolio down.

Top 5 Stocks Must to Sell in May in 2012 #1: CMG

Chipotle Mexican Grill (NYSE:CMG) has had a great run — up 200% over the last two years. But the company now faces a number of challenges. One is potential market saturation, which would lead to a decline in its record revenue growth. There’s also a new emphasis among consumers on homemade meals as well as upgraded supermarket takeout food.
In short, Chipotle must deal with labor-cost pressures, unstable commodity/food expenses and customers who are concerned about prices. International growth is Chipotle’s big plan, but it’s not clear yet if its spicier foods will translate as well in international markets as menus of competitors such as McDonald’s (NYSE:MCD) and KFC (NYSE:YUM).

Top 5 Stocks Must to Sell in May in 2012 #2: DNKN

Dunkin Brands Group (NASDAQ:DNKN) has put up some good numbers recently, but I’m leery of several things, including the company’s huge debt load and ownership structure. DNKN is a “controlled company,” with over 80% of its ownership in the hands of three private-equity firms (Bain, Carlyle and Thomas H. Lee), which always raises the concern that private-equity owners will want to “cash out.”
In addition, Dunkin Brands faces a tough challenge in its efforts to do better in the afternoons and evenings and unseat Starbucks, the currently leader at those times of the day. DNKN is also not cheap, trading at more than 25X expected 2012 earnings. I think a more reasonable valuation would be around 16X, which would be closer to $20 a share.

Top 5 Stocks Must to Sell in May in 2012 #3: DTV

DirecTV (NYSE:DTV) is expecting to face rapidly increasing programming costs, in large measure because the company has had to fork over ever-increasing amounts of cash to keep exclusive National Football League content for its NFL Sunday Ticket package.
Not surprisingly, DirecTV has said that customer growth should slow as a result of higher costs, and management recently signaled a shift in focus toward “customer retention” rather than heavy promotions to draw in new subscribers. Equipment subsidies and marketing costs now top $800 for each customer acquired, and it takes about 18 months for DirecTV to get that money back.
In addition, more content is available online, so more people are turning to the Internet for programming. That hurts DTV more than competing cable companies that offer high-speed Internet access along with phone and television service.

Top 5 Stocks Must to Sell in May in 2012 #4: RSH

Radio Shack (NYSE:RSH) is struggling with competition from giants such as Amazon (NASDAQ:AMZN) and Best Buy (NYSE:BBY). The company met analysts’ expectations in its fourth-quarter report, but that came on the heels of four straight earnings misses, and first-quarter results announced April 24 went back to being another miss.
Part of the problem is that a higher percentage of the company’s sales are coming from mobile products, which carry very low margins, and changes at Sprint have also impacted results. In addition, in early March, right as the company was searching for a new lead advertising agency, Executive Vice President and Chief Marketing Officer Lee Applebaum abruptly left the company. I would stay away from the stock until there’s a clearer picture of where the company is going.

Top 5 Stocks Must to Sell in May in 2012 #5: SHLD

Sears Holdings (NASDAQ:SHLD) just keeps reporting lower sales and profits. With its poor customer service and consumer concerns about the quality of its appliances and other onetime A-level items, the retailer is on a downward path.
CEO Eddie Lampert has been scrambling to raise cash and calm investor fears, and he does have a history of igniting investor interest from time to time. To stay afloat with enough cash flow, Sears has been trying to sell or spin off stores. One well-respected Wall Street analyst called the process “a controlled liquidation of its chain,” and I agree. While the move sent SHLD soaring more than 20% and put rumors of bankruptcy to rest,  in the end, Sears looks to be on its way to another cash-flow crunch.
You can’t run a business by selling off assets. Sears needs to address its fundamental problems and find a buyer that can provide synergistic upside. Meanwhile, the company has too big of a struggle ahead at a time of high unemployment, shrinking credit and competitors doing a better job both online and in big-box stores.

12 Best Companies to Invest in that Increasing Dividends

The market has seen some selling over the past couple of weeks, but that hasn’t poisoned the well for companies boosting dividends. This week, we saw another big batch of firms taking steps to boost shareholder value, including a big discount retailer, a giant railroad and one of the largest tech bellwethers in the market. 12 companies made it onto our Companies Increasing Dividendslist this week:
Membership discount retailer Costco (NASDAQ:COST) gave its shareholder membership a bonus, upping its quarter payout 14.6% to 27.5 cents per share. The new dividend is payable June 8 to shareholders of record as of May 25. The new dividend yield, based on the May 9 closing price of $82.62 (the day the dividend was announced), is 1.33%.
Railroad giant 12 Best Companies  to Invest in #1 CSX Corp. (NYSE:CSX) delivered shareholders a 17% increase in its quarterly dividend to 14 cents per share. The new payout will leave the station June 15 to shareholders of record as of May 31. The new dividend yield, based on the May 9 closing price of $21.66, is 2.59%.
Industrial device maker 12 Best Companies  to Invest in #2 Curtiss-Wright (NYSE:CW) designed a new dividend to shareholders, turning up the dial on its dividend 12.5% to 9 cents per share. The new payout will be made July 13 to shareholders of record as of June 29. The new dividend yield, based on the May 8 closing price of $33.01, is 1.09%.
Logistics company 12 Best Companies  to Invest in #3 Expeditors International of Washington (NASDAQ:EXPD) drew up a plan to boost its dividend by 12% to 28 cents per share. The new payout will be delivered June 15 to shareholders of record as of June 1. The new dividend yield, based on the May 4 closing price of $39.50, is 1.42%.
Financial data provider 12 Best Companies  to Invest in #4 FactSet Research Systems (NYSE:FDS) analyzed its books and released a 15% boost in its quarterly payout to 31 cents per share. The new dividend is payable June 19 to shareholders of record as of May 31. The new dividend yield, based on the May 9 closing price of $104.38, is 1.19%.
Chip-giant 12 Best Companies  to Invest in #4 Intel (NASDAQ:INTC) processed a new 7% larger payout to shareholders of 22.5 cents per share. The new dividend will be paid beginning in the third quarter. The new dividend yield, based on the May 7 closing price of $27.76, is 3.24%. This is Intel’s third dividend increase in the last 18 months.
Chemical maker 12 Best Companies  to Invest in #5 LyondellBasell Industries (NYSE:LYB) went into its fiscal lab and came out with a 60% increase in its quarterly dividend to 40 cents per share. The new payout will be made on June 11 to shareholders of record as of May 21. The new dividend yield, based on the May 9 closing price of $40.10, is 3.99%.
Hotel chain operator Marriott International (NYSE:MAR) booked a 30% upgrade in its quarterly dividend to 13 cents per share. Shareholders will be able to check in to the new payout on June 22 if they reserve an ownership stake by May 18. The new dividend yield, based on the May 7 closing price of $39.29, is 1.32%.
Safety products maker 12 Best Companies  to Invest in #6 Mine Safety Applications (NYSE:MSA) moved to ensure the fiscal safety of shareholders by raising its dividend 8% to 28 cents per share. The new dividend yield, based on the May 7 closing price of $42.28, is 2.65%.
Diversified consumer products maker Newell Rubbermaid (NYSE:NWL) opened up a 25% increase in its quarterly payout to 10 cents per share. The new dividend is payable June 15 to shareholders of record as of May 31. The new dividend yield, based on the May 10 closing price of $18.43, is 2.17%.
Nevada power generation company 12 Best Companies  to Invest in #7 NV Energy (NYSE:NVE) upped the volage on its quarterly payout by 31% to 17 cents per share. The new dividend is payable June 20 to shareholders of record as of June 5. The new dividend yield, based on the May 9 closing price of $17.03, is 3.99%.
Death care products firm 12 Best Companies  to Invest in #8 Service Corp. (NYSE:SCI) decorated shareholders’ plots with a 20% increase in its quarterly payout to 6 cents per share. The new payout will be paid July 31 to shareholders of record as of July 13. The new dividend yield, based on the May 9 closing price of $11.71, is 2.05%.

Four Dividend Stocks to Invest in 2012

Dividend growth investing is a strategy where investors buy stock in companies which consistently raise distributions. This leads to higher dividend payouts over time, and also leads to capital gains, as the market adjusts stock prices to reflect the higher income generated by the stock.
Dividend growth does not just miraculously appear out of a thin air however. In order to get dividend hikes every year, the company has to generate earnings growth over time.
For example, back in 2001, Chevron (NYSE:CVX) earned $1.85 per share, paid a dividend of $1.325 per share and traded at $44.81 per share. Ten years later, in 2011 the company is earning $13.44 per share, the dividend is $3.09 per share. The stock is trading around very comfortable $100 per share. The company is expected to distribute at least $3.24 per share in 2012. Investors who purchased the stock a decade ago are sitting at handsome capital gains, and are earning 7.20% yield on cost.
In order to generate high returns from dividends and capital gains, investors need to focus on companies which will be able to earn higher amounts in the future.
Corporations that have designated roadmaps to generate higher earnings per share, increase investors odds of receiving higher distributions and enjoying capital gains in the process are a great place to start earning money for your portfolio.
Below, you could find a list of four companies which have outlined their corporate strategies of achieving high earnings per share for the next several years:

Four Dividend Stocks to Invest in 2012 #1 Coca-Cola

Beverage company Coca-Cola (NYSE:KO) engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. This dividend king has raised distributions for 50 years in a row.
Coca-Cola’s 2020 Vision Strategy strives for a high single digit annual EPS growth throughout this decade, driven through 5%-6% annual increases in revenues as the company expects 3%-4% yearly increase in sales volumes. The company is focusing more of its attention to still beverages like waters and juices, which stand the chance of delivering strong growth over time.
In addition, growth could come from emerging markets such as China and India, where the average number of servings per capita is much lower than that of the US. The company is pursuing differing strategies to capture the imaginations (and dollars) of consumers in emerging, developing and developed markets.
While the company might be focusing on growth through innovation and productivity initiatives in the developed markets, it might generate growth in emerging markets by heavy investing and maximizing volumes.
In addition, the company is playing on strong long-term demographic trends of continued rise in the global population, increased urbanization as well as the expected rise of the middle class worldwide. Yield: 2.70% (analysis)

Four Dividend Stocks to Invest in 2012 #2 Clorox

Clorox (NYSE:CLX) manufactures and markets consumer and institutional products worldwide. The company operates in four segments: Cleaning, Lifestyle, Household, and International. This dividend champion has consistently raised distributions for 34 years in a row.
In 2007 the company introduced its Centennial Strategy where the company is focused on achieving double-digit annual growth in economic profit. A key driver of the strategy is to accelerate sales by growing existing brands, including expanding into adjacent categories, entering new sales channels and increasing penetration within existing countries.
The company also anticipates using its strong cash flow to pursue growth opportunities and increase shareholder returns.
Basically the company will try to deliver further growth through an ongoing focus on consumer megatrends.
In addition to that the company will be targeting a 2% sales growth through product innovation. The company projects sales growth of 3-5 percent, excluding acquisitions and expansion into new geographies through 2013.
Last but not least Clorox will target margin expansion and maximizing cash flow through implementation a continued robust cost-saving program and maintaining price increases the company has taken. Yield: 3.40% (analysis)

Four Dividend Stocks to Invest in 2012 #3 Kimberly-Clark

Kimberly-Clark (NYSE:KMB), together with its subsidiaries, engages in manufacturing and marketing health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional and Other, and Health Care.
This dividend aristocrat has consistently raised dividends for 40 years in a row. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets.

Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Under the company’s global business plan, announced in 2003, it is looking for annual sales growth in the 3%-5% range, EPS growth in the mid to high single digits and dividend increases in line with earnings growth.  Yield: 3.80% (analysis)

Four Dividend Stocks to Invest in 2012 #4 IBM

IBM (NYSE:IBM) provides information technology (IT) products and services worldwide. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. This dividend achiever has rasied distributions for 17 years in a row.
IBM has publicly announced its goal to hit $20 in earnings per share by 2015. The company is one of the most consistent repurchasers of stock, having reduced the total shares outstanding by 50% since 1995.
The company expects that one third of the gains would come from revenue growth driven by organic growth and acquisitions. The company is relying on growth markets, its business analytics segment, its smarter planet initiative as well as its cloud and next generation data center businesses to deliver revenue growth.
Almost one third of the growth would come from share buybacks as well. The remainder would come from increased productivity in its core segments, as well as continuing its focus on offering high value to its customers. Yield: 1.70% (analysis)