HRS Harris Corp.

The board of directors of Harris Corporation (HRS) recently announced a hike in the company’s quarterly cash dividend by 5 cents or 18% to 33 cents per share on its common stock. The company will pay the dividend on March 16, 2012 to shareholders of record, at the close of business on March 7, 2012.

The cash dividend to be paid on an annual basis will be $1.32. The payout ratio as declared by the company is set to be in between 20% to 25%.

This is the company's fifth dividend increase during the last five years. The company has been paying dividends uninterruptedly for the last 30 years. The current dividend yield is 3.03%.

At the end of the second quarter of fiscal 2012, Harris had cash & cash equivalents of $387 million. The excess cash available with the company will be utilized to repurchase shares or to pay dividends to its shareholders.

Boeing Co.(BA) and General Dynamics Corp. (GD) are the nearest rivals of Harris. Recently, both these competitors paid quarterly dividends of 44 cents and 47 cents with dividend yields of 2.35%, 2.6%, respectively, which happens to be quite higher than the dividend paid by Harris. However, the current dividend yield of Harris is higher than both its competitors.

Besides, raising share holder’s value by means of increasing dividends, Harris also issued a share buyback plan of $1 billion during fiscal 2012. In the last two quarters, the company has already bought shares worth $416 million at an average price of $37.67.

After the dividend announcement made by Harris on Monday before the opening bell, the shares of the company increased by 52 cents to $43.63 during the trailing three days trading.

Continuous order wins, huge order backlog coupled with strong demand of Harris’ next-generation Falcon III tactical radioin the international markets will drive the company’s top-line growth going forward.

However, slowdown in international as well as national defense expenditures coupled with failure to successfully integrate the newly acquired companies into its own business model may be disastrous for Harris. We, thus, maintain our long-term Neutral recommendation for Harris.

Currently, Harris has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

Harris Corporation, based in Melbourne, FL, has strong market share positions in broadcast equipment, high-frequency and multi-band “man-pack” tactical radios, and ground-based military satellite communications terminals.

 
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