Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $82.59 |
| Current Quarter Dividend (Q3 2023) | $82.59 |
| LifeTime Dividend | $12,548.89 |
| Estimated Annual Dividend | $9,961.70 |
The capital allocation for the week of 07/09/2023 to 07/15/2023 will be used to add to our position in General Dynamics (NYSE: GD)
GD – Position Update
Since our last check-in on GD in week 3 of 2021, the company reported FY 2020 annual report and earnings on 03/09/2021, FY 2021 earnings on 01/26/2022, FY 2022 earnings on 01/25/2023, and Q1 2023 earnings on 04/26/2023. In addition, the share price has increased 39.8% from $153.17 to $214.15.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 31 years | 29 years | |
| Yield | 2.41% | 2.87% | 2.05% |
| Payout Ratio | 42.19% | 39.89% | |
| P/E | 17.52 | 13.90 | 17.24 |
Q1 2023 earnings report
Did GD’s latest earnings report raise any warning flags?
In Q1 2023, GD continued its steady trend of topline revenue and EPS growth. Three of the four divisions recorded higher revenue numbers compared to the year ago quarter, with only Aerospace seeing a decline. Operating margins on the other hand saw minor declines in 3 of the 4 divisions, with only Combat Systems experiencing an increase in the margin. This is something to keep an eye on in the coming quarters.
Overall, revenue grew 5.4%, net income was flat, and EPS were 1.1% higher than in the year ago quarter.
| Revenue (in millions) | Net Income (in millions) | EPS . | |
| Q1 2022 | $9,392 | $730 | $2.61 |
| Q1 2023 | $9,881 | $730 | $2.64 |
| % Change | 5.2% | -% | 1.1% |
Additional noteworthy developments during the quarter:
- GD ended the quarter with an order’s backlog of $89.8 billion, up 3% from the year-ago quarter.
Looking ahead, the company did not provide any update or commentary on it previous guidance for FY 2023. The guidance provided during the FY 2022 earnings release expects EPS of $12.60 to $12.65 per share on revenue of $41.2 to $41.3 billion and operating margin of 10.9%.
Thesis
Why are we adding to our position in GD?
Following the Q1 2023 earnings report, GD’s share price has seen a pull-back where shares are now trading in the bottom quarter of their 52-week range. This has brought the company’s valuation close to our desired entry criteria.
Furthermore, with continued geo-political instability and the ongoing war in Ukraine, we expect GD’s business to continue its stead performance both in the short and long term.
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