Updated 3/10/25
Huntington Ingalls Industries (HII) is one of the largest shipbuilding companies in the United States, playing a critical role in supplying the U.S. Navy with aircraft carriers, submarines, and other military vessels. Defense contractors like HII tend to be steady businesses, benefiting from long-term government contracts that provide predictable revenue streams.
For dividend investors, HII presents an interesting case. It offers a solid yield, a track record of steady dividend increases, and relatively strong financials. But like any investment, there are risks, particularly in a high-capital industry where cash flow can be volatile.
This deep dive into HII’s dividend profile will cover its payout strength, financial health, valuation, and potential risks to help income-focused investors evaluate whether this stock fits their portfolio.
Key Dividend Metrics
📢 Dividend Yield: 2.76%
💵 Annual Dividend: $5.40 per share
📈 5-Year Average Dividend Yield: 2.26%
🛡️ Payout Ratio: 37.61%
📆 Dividend Growth Streak: 12 consecutive years
💰 Latest Dividend Payment: March 14, 2025
⚠️ Ex-Dividend Date: February 28, 2025
Dividend Overview
HII currently offers a dividend yield of 2.76%, which is slightly above its five-year average of 2.26%. A rising yield can sometimes indicate a stock is under pressure, but it can also signal an attractive opportunity for dividend investors.
The company has a solid track record of dividend payments, increasing its payout for 12 straight years since it spun off from Northrop Grumman in 2011. While many investors focus on flashy growth stocks, defense contractors like HII offer a more stable, predictable income stream thanks to government-backed contracts.
The payout ratio sits at a comfortable 37.61%, meaning the company is using less than 40% of its earnings to fund dividends. That’s a healthy level, leaving room for reinvestment while still rewarding shareholders.
Dividend Growth and Safety
📊 Dividend Growth Rate (5-Year CAGR): ~12%
🔄 Dividend Increase Streak: 12 years
💡 Dividend Safety Score: Strong
HII has been a reliable dividend grower, averaging around 12% annual dividend increases over the past five years. This consistency reflects management’s confidence in the company’s ability to generate long-term cash flow.
The relatively low payout ratio suggests there’s still room for dividend hikes in the future. However, free cash flow is something to watch. While HII generates strong operating cash flow, free cash flow (after accounting for capital expenditures) is much lower, coming in at just $78.25 million.
If cash flow remains tight, dividend growth could slow down. That being said, given the stability of HII’s business and the critical nature of its defense contracts, the dividend appears well-supported for now.
Chart Analysis
Price Movement and Trend
The chart for Huntington Ingalls Industries (HII) shows a clear downtrend over the past year, with the stock experiencing a sharp drop in late October. Since then, prices have attempted to stabilize, but the stock remains well below its previous highs. The most recent movement indicates a slight rebound, pushing back toward the $195 range.
The 50-day moving average (light blue line) has been trending downward for months and remains below the 200-day moving average (dark blue line). This suggests that the overall trend is still bearish. However, the recent uptick in price is notable, as it appears to be making an attempt to reclaim lost ground.
Moving Averages
A significant technical factor in this chart is the wide gap between the 50-day and 200-day moving averages. The 50-day moving average is clearly sloping downward, staying below the longer-term 200-day moving average. This confirms that the stock remains in a long-term downtrend.
However, the price is now testing levels around the 50-day moving average. If the stock can break above this level with strong momentum, it could indicate the start of a trend reversal. But if it struggles to hold this level, another pullback could be on the horizon.
Volume Activity
Volume has fluctuated quite a bit over the past few months, with some noticeable spikes during key price drops. In October and again in late November, there were major selling events with large red volume bars, suggesting heavy institutional activity.
More recently, volume has picked up during the rebound, with several green bars appearing as the stock moves upward. This could indicate that buyers are stepping in at these lower levels. However, the volume isn’t significantly above average, meaning it’s not yet a clear signal of a sustained reversal.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart shows that HII was in deeply oversold territory late last year, dipping below 30. This typically suggests excessive selling pressure and often leads to a short-term bounce. Since then, the RSI has climbed and is now approaching 70.
An RSI near 70 indicates that the stock is becoming overbought in the short term. This means the recent rally could be due for a pause or even a pullback unless buying pressure continues to push it higher.
Recent Price Action
Looking at the most recent candles, the stock has been posting higher lows and higher highs, a sign of short-term strength. The latest five candles show some solid upward momentum, with minimal long wicks on the top, indicating that sellers have not aggressively stepped in yet.
However, the last couple of trading sessions show smaller real bodies, suggesting that buying pressure may be slowing down. If the stock struggles to move above $200, there could be some resistance forming around that level.
Analyst Ratings
Upgrades
📈 Citi’s Positive Outlook
Citi analyst Jason Gursky issued a more optimistic research note, suggesting that defense stocks, including HII, have been undervalued since late 2024. He pointed out that concerns over government spending efficiency have weighed on valuations, but the broader military budget remains intact. Gursky expects mid-single-digit growth in the sector and sees HII as well-positioned to benefit from increased defense contract spending.
🚀 Wells Fargo’s Reassessment
Wells Fargo upgraded HII to overweight from neutral, citing improved contract visibility and a stronger-than-expected backlog of orders. Analysts noted that while defense contractors have faced headwinds, Huntington Ingalls’ focus on high-priority naval programs provides long-term revenue stability. They also believe recent cost-cutting measures will enhance profitability moving forward.
Downgrades
📉 Goldman Sachs’ Caution
On February 10, 2025, Goldman Sachs revised its outlook on HII, lowering its price target from 188 to 145 while maintaining a sell rating. Analysts expressed concerns over cost overruns on key projects and the potential for further delays in government contracts. They also cited weaker-than-expected free cash flow as a risk factor for maintaining dividend growth in the near term.
⚠️ Bank of America’s Adjustment
Bank of America adjusted its stance on HII, shifting from neutral to underperform while cutting the price target from 250 to 195. The downgrade was based on concerns that earnings growth could be pressured by rising input costs and an increasingly competitive environment. Analysts also highlighted the company’s declining operating margins as a sign of potential weakness.
Consensus Price Target
💰 Average Price Target: 198.34
📍 Range: 145 (low) to 312 (high)
📊 Number of Analysts: 13
The consensus target price for HII reflects a wide range of expectations, with some analysts forecasting a strong rebound while others remain cautious about near-term challenges. The recent mix of upgrades and downgrades suggests that while there are concerns about cost pressures and project execution, HII still holds potential upside if it can navigate these hurdles effectively.
Earnings Report Summary
Huntington Ingalls Industries (HII) wrapped up its latest earnings report with a mixed bag of results. On one hand, the company saw solid revenue growth, pulling in $11.5 billion for the full year—up about 7.3% from the previous year. The fourth quarter was particularly strong, with revenue jumping 13% year-over-year to hit $3.2 billion. That kind of growth is encouraging, especially in an industry where long-term contracts and government spending play such a huge role.
However, not everything was smooth sailing. Profitability took a bit of a hit, with fourth-quarter earnings coming in at $3.15 per share, which was lower than what analysts had been expecting. Much of that shortfall came from struggles at the Newport News shipbuilding facility, where supply chain delays and rising costs weighed on margins. Even with strong revenues, those operational hiccups kept profits from fully keeping pace.
Operationally, HII did have some major milestones throughout the year. The company successfully delivered key projects, including the Virginia-class submarine New Jersey and the amphibious transport dock Richard M. McCool Jr. Those are big wins that help solidify HII’s reputation as a top player in naval shipbuilding.
The backlog of new contracts was another bright spot, reaching $48.4 billion by the end of the first quarter. That’s a reassuring sign for the company’s long-term revenue stream. Having that kind of order book means a steady flow of work for the foreseeable future, which is always good news for a capital-intensive business like this.
Looking ahead, HII has provided its outlook for 2025, and it’s clear they expect growth to continue. Shipbuilding revenue is projected to come in between $8.9 billion and $9.1 billion, while the Mission Technologies segment should bring in another $2.9 billion to $3.1 billion. Analysts are forecasting full-year revenue around $12.1 billion, so expectations remain relatively strong.
Overall, while HII showed impressive revenue growth and continued to secure new contracts, the earnings miss and operational challenges serve as a reminder that execution is just as important as top-line growth. Investors will likely be keeping a close eye on how the company manages costs and whether profitability can catch up with its strong sales performance.
Financial Health and Stability
📌 Revenue (TTM): $11.53 billion
📌 Gross Profit (TTM): $1.45 billion
📌 Operating Cash Flow (TTM): $393 million
📌 Total Debt: $3.46 billion
📌 Debt-to-Equity Ratio: 74.13%
HII operates in a capital-intensive industry, meaning it carries a fair amount of debt. The company’s debt-to-equity ratio of 74.13% is on the higher side, but not unusual for a defense contractor that relies on large, long-term projects.
One key factor that supports HII’s financial stability is its consistent revenue stream. Government contracts provide a level of predictability that many companies don’t have. However, quarterly earnings have been volatile, with a sharp 55% year-over-year decline in the most recent quarter.
Return on equity (ROE) is healthy at 12.56%, which indicates that management is putting shareholder capital to good use. However, return on assets (ROA) is much lower at 3.56%, showing the heavy asset burden of shipbuilding operations.
Valuation and Stock Performance
📊 Trailing P/E Ratio: 14.04
📊 Forward P/E Ratio: 17.64
📊 Price-to-Sales Ratio: 0.67
📊 Book Value Per Share: $119.25
📊 Current Stock Price: $197.03
HII is currently trading at a trailing price-to-earnings (P/E) ratio of 14.04, which seems reasonable for a company in the defense sector. However, the forward P/E is slightly higher at 17.64, suggesting analysts expect earnings growth to slow down.
The price-to-sales ratio of 0.67 indicates that the stock isn’t expensive relative to its revenue. Its price-to-book ratio of 1.64 also suggests a fair valuation.
HII’s stock performance has been rough lately. Shares are down about 32% from their 52-week high of $294.81, now trading around $197.03. Compared to the S&P 500, which is up over the same period, HII has significantly underperformed. The stock is below both its 50-day moving average ($185.97) and 200-day moving average ($229.47), signaling short-term weakness.
Risks and Considerations
Government Dependency
HII’s business relies entirely on U.S. defense spending. While this provides revenue stability, it also means any cuts to military budgets could negatively impact the company.
Debt Load and Cash Flow Constraints
With $3.46 billion in debt, HII has to carefully manage its finances. While operating cash flow is strong, free cash flow is much lower, which could impact future dividend growth.
Earnings Volatility
HII’s quarterly earnings dropped 55% year-over-year, raising concerns about profitability. If this trend continues, it could put pressure on both the stock price and the company’s ability to increase dividends.
Stock Price Performance
HII has significantly underperformed the broader market, which could be a red flag for investors. While the dividend remains strong, declining stock value could limit total returns for shareholders.
Final Thoughts
Huntington Ingalls Industries offers a stable and growing dividend, supported by long-term government contracts. The company’s 2.76% yield, 12-year dividend growth streak, and modest payout ratio make it an appealing option for income investors.
However, there are a few red flags. Free cash flow is relatively low, and the company carries a fair amount of debt. Earnings have been volatile, and the stock has struggled recently.
For long-term dividend investors, HII could still be worth considering, but it’s important to keep an eye on cash flow trends, government spending policies, and overall stock performance.
Recent Comments