Due to the geopolitical chaos so far this year, defense stocks have held up well compared to the overall market. Raytheon Technologies (NYSE:RTX) is no exception. RTX stock is up more than 5% year-to-date. Not bad, considering the stock market (as measured by major indices) is down by double-digits.
That said, you may be concerned that Raytheon’s strong performance since the start of 2022 won’t last. You may think that, given how much its lift in price has had to do with Russia’s invasion of Ukraine, that if that situation de-escalates, the aerospace and defense giant will pull back to lower prices.
Yet there’s more on its side than just the prospect of increased military spending on the heels of this conflict. This stock’s status as a safe haven during a stormy market is something else that could keep it trending higher.
RTX Stock: Defensive, Not Just Defense
When you think of Raytheon, its famed missile systems may come first to mind. In other words, national defense. But the Raytheon of today is far more than a major military contractor. Through its 2020 merger with United Technologies, it significantly increased its presence in the aerospace industry. It’s not a defense company anymore. If one were to categorize it, it may be more accurate to call it a diversified industrial company.
Along with the fact that perception and reality may differ when it comes to its business, the same thing is at play when it comes to RTX stock. You may think of it as just a defense stock. Something that surges in times of war, and falls back in times of peace.
However, “defensive stock” may be a better descriptor than defense stock. In other words, RTX is a stock with stable earnings and consistent dividends. It’s the type of stock that holds steady during times of high market volatility. The very times we are experiencing today.
Given the strengths of its underlying businesses, Raytheon is likely to be resilient compared to stocks overall. In fact, it’s proven to be resilient this year, and especially after the recent broad market selloff.
Low Volatility and Profit Potential
Throughout 2022, the Russia-Ukraine crisis has been a big driver in the performance of RTX stock. But something else has helped it stay in the green, when most equities find themselves in the red. That would be its safe harbor bona fides.
Besides the qualities listed above, there are other variables that point to it being an attractive safe harbor. For one, it’s a low volatility stock, as measured by the beta ratio. Any stock with a beta under 1 is less volatile than the overall stock market. Raytheon’s beta at present comes in at 0.88.
Also, Raytheon Technologies has a long history as a dividend stock. The company has paid a cash dividend every year since 1936. Not only that, it has increased its payout 28 years in a row. That earns it a place among the dividend aristocrats. Right now, shares have a forward yield of 2.25%.
On top of these qualities, there’s another reason for holding RTX during Wall Street’s current rollercoaster ride: the potential for price appreciation. In the coming months, more investors could cycle into it. This may help it move back above the $100 per share mark.
The Verdict on RTX Stock
Raytheon Technologies currently earns an “A” rating in my Portfolio Grader. It goes without saying you wont “get rich” owning this stock. In times like these though, protecting your capital, not risking it, should be your top priority.
In recent years, it has become not just a defense company, but a major aerospace company as well. Well-diversified, it will keep delivering steady results. Even if economic conditions follow the lead of market conditions, and become more challenging.
In turn, it will continue paying out dividends, as it has done over the past 86 years. It will continue to raise its dividend as well. as it has done for the past 28 years. Alongside this payout, investors getting in today could see solid returns, as further inflows from investors seeking defensive stocks dive in, bidding it higher.
Whether or not the global chaos carries on, consider today a great time to buy RTX stock.
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Source: Investor Place