General Dynamics (NYSE:GD)

General Dynamics Corporation is an American conglomerate active in the defense sector. Since 2008 GD is the fifth largest global defense company. The company has four main business segments: Marine Systems, Combat Systems, Information Systems, and Technology and Aerospace Systems. The company built the F-16, the most-produced Western-made fighter, but that subsidiary was sold to Lockheed in 1993. 

GD is also the leading manufacturer of business jets, with its Gulfstream fleet accounting for a quarter of all business jet sales. The needs of the U.S. military have changed dramatically since the Cold War era, with an increased emphasis on a more responsive and versatile military. With three-quarters of sales coming from the US government, GD is heavily dependent on Department of Defense (DoD) budget spending. The DoD budget is fairly cyclical, but the war in the middle east has increased defense spending in recent years. However, budget deficits and political pressure to cut defense spending can have a major impact on the funds available to finance the company's contracts. 

Approximately 10% of GD sales come from international defense customers. International sales, however, can carry more risk. Political instability and fluctuations in exchange rate may impact the company's revenue and profitability.

THE long term performance GD's stock price stands at 2.13%, which is quite modest. This shortcoming is offset by a price-to-earnings ratio of just 8.10 and a more than decent average annual dividend growth, with 13,76%The company has managed to increase shareholder income for 16 consecutive years, which is not bad, but not comparable to other stocks in our portfolio. Le distribution ratio is very cautious, with only 25.38%, which leaves a comfortable margin for GD to continue increasing its dividend in the future, even in the event of a difficult passage.

The company's stock is sensitive to market variations, with a beta of 1.25, and volatility also stands at 18.72%. The stock's performance over the past 35 years versus the S&P is remarkable., but it is even more so if we consider it since the first Gulf War.

GD does not offer any particular protection against fluctuations in the dollar.

In conclusion, although benefiting from an interesting dividend progression and a low distribution ratio, the profits that can be expected from the stock are not sufficient in relation to the risk incurred. We therefore prefer for the moment to remain on the sidelines of GD. On the other hand the title should be kept in the portfolio for those who have already purchased it.