Open Fire On These Dividend Stocks

Investing In Firearms And Ammo Companies

 

There’s no question we live in a very dangerous world. Terrorist acts, murders and personal attacks seem to bombard the headlines on a daily basis without an end in sight. Because of this sad fact, when it comes to personal safety, most Americans often turn to some form of personal firearm for protection. While violent crimes and other terror acts seem to continually be on the rise, it seems that price is no object when it comes to our personal safety. That being said, there are a number of dividend paying companies in the guns and ammo sector that might find a home in your dividend portfolio as more Americans embrace firearms as a form of personal self defense. With more guns and ammo being sold certain companies seem poised to benefit from this rising violent trend.

 

First up, we’ll examine Alliant Techsystems Inc. (ATK). Headquartered in Arlington, Virginia, ATK supplies ammunition, firearms, and shooting accessories for the hunting and outdoor recreation markets. It also provides the military small, medium, and large caliber ammunition; propulsion systems for tactical missiles, precision munitions; gun systems; and warheads. Currently yielding a low 1.00% dividend with an equally low payout ratio of 11.0% based on an EPS of 10.76, ATK has plenty of room to continue paying and increase its distributions. On the valuation side of things ATK has a current PE of 12.02 which is well below industry peers and the S&P. Forward PE makes this stock look even cheaper at only 10.00.

 

Firing up our next dividend stock is Olin Corp. (OLN). Based in Clayton, Missouri OLN produces and manufactures many specialty chemicals but is probably most famous for its Winchester division which develops, manufactures, and sells rifles under the Winchester name. OLN also produces and sells small caliber military ammunition for use in infantry and mounted weapons systems. Currently yielding a healthy 3.20% with a moderate payout ratio of 50.6% based on an EPS of 2.00, OLN has a dividend that is considered to be safe. Looking at the valuation of OLN the stock currently sports a current PE of 11.64 which, like ATK, places it well below industry peers and the S&P. Forward PE for the stock is a little higher at 12.58. While not a pure play firearm company, OLN does offer company diversity as is operates in three distinct segments only one of which is related to firearms.

 

Shooting on down the line is another firearm company that is synonymous with a famous firearm, Sturm, Ruger & Co. Inc. (RGR). Headquartered in Southport, Connecticut, RGR designs, manufactures, and sells various firearms including single-shot, auto loading, bolt-action sporting rifles, revolvers and shotguns under the Ruger name. Currently yielding a very generous 4.00% with a moderate payout ratio of 50.6% based on an EPS of 5.09, RGR, like ATK and OLN, has a very safe dividend with room to grow. Looking at the valuation of RGR it has a current PE of 10.11 with a slightly higher forward PE of 12.43. Again, like the two stocks mentioned before, on a pure PE basis RGR is cheaper than many industry peers and the S&P as well. But as we all know, valuation cannot be measured with just a PE number.

 

Our final guns and ammo dividend stock is National Presto Industries Inc. (NPK). Based in Eau Claire, Wisconsin, NPK is probably the most diverse of the companies mentioned as it produces and sells many houseware items such as skillets, griddles, corn poppers, waffle makers, pizza ovens, electric tea kettles, rice cookers, coffee makers and 40mm ammunition, medium caliber ammunition cartridge cases, firing devices, smoke and tear gas grenades as well as stun munitions. Next time you think of waffle makers and ammunition, think National Presto Industries Inc. These diverse offerings remind me of another company I mentioned not long ago as my October stock purchase consideration, Hawaiian Electric Industries Inc. (HE) which operates as an electric utility and a bank. I guess some company conglomerates make for some interesting combinations. NPK is currently yielding a relatively low 1.60% with an extremely high payout ratio of 100.00% based on an EPS of 5.05. The current PE of NPK is 12.2 which is well below the market in general. From a dividend perspective, NPK might not be the safest of the income producers at its present state.

 

Clearly, there are some pretty diverse names and companies to invest in if you are looking to add exposure to the guns and ammo sector in your portfolio. Are you firing up your dividend portfolios with any of the names mentioned? Please let me know below.

 

Disclosure: Long NONE

38 thoughts on “Open Fire On These Dividend Stocks

  1. Nice round up summary of the top firearm dividend stocks. I pulled the trigger on RGR, but then I got scared and sold it the next day. Just felt a little uncomfortable holding that in my portfolio. With tougher gun regulations, do you think these companies would have trouble keeping up with sales? It would be nice if they have contracted out to sale to military or are they usually selling them for individuals?

    • Hi PC,

      Glad you enjoyed this round up. Gun regulations have been a hot topic of conversation for decades and despite proposed regulations and other controls the industry still survives. That being said, many of the companies mentioned in this article have government (police, military, etc.) contracts for most of their guns, ammo and services. As long as we have a military and police force there will always be a need for the products and services of these companies. Thanks for stopping by and sharing your RGR purchase with us.

    • Hi SAD,

      RGR seems to be a popular pick in this sector and I agree the odd mix of NPK is definitely an interesting one. Housewares, guns and ammo. What a great combination for one company to be in. Thanks for commenting.

  2. I had to read that twice to make sure I wasn’t going crazy. Waffle makers and pizza ovens? Talk about diversification – that’s breakfast and dinner right there, and you could even make a nice afternoon tea with their kettle! 🙂

    Out of curiosity – where do you get your ideas for these articles? 🙂
    Seraph recently posted…Visa Announces Dividend IncreaseMy Profile

    • Hi Seraph,

      Waffle makers, pizza ovens, popcorn makers, guns and ammo. Yes, NPK has a very, very diversified portfolio of products and services. It’s always interesting to learn about companies that are in varied businesses and sectors.

      My ideas for stories comes from many places. Some of my earlier stories came from inspiration while brushing my teeth and noticing who made the products I use in my bathroom. Another time while eating breakfast I was inspired to write about dividends I found around a typical breakfast table. The point of many of my “simple” articles stems from the notion that finding great companies to invest in doesn’t have to be difficult. You just need to look around and see what products or services you use on a daily basis and construct a story around it. For the more eclectic stories I go to dividend.com and from there I search for any dividend stock and then click to see what other companies are in the same sector and develop a theme around what I find. Thanks for stopping by!

  3. DivGro, very interesting list. I looked at OLN and while I like the yield they don’t seem to raise dividends so I am out on that.

    RGR. Very interesting. Where did you get your dividend info and yield of 4%? As I looked at it, Scottrade & Yahoo have the annual dividend at $1.80, which would be 3.5%.

    When I went to the RGR website, their August 2014 declaration for Q3 was $.45, but the previous was $.49. They also don’t appear to have a dividend policy the increases each year but is very closely tied to earnings. There is nothing wrong with that and they are on the CCC as a challenger but it sounds like this company would not have any hesitation to cut/freeze a dividend. I am just guessing on that. More DD needed but thanks for the idea.

    I will add this to the watch list and do some more digging. I would love a gun company. At some point the work is going to wake up and recognize a gun in every school, bank, shopping center and everywhere else people gather is the only safe measure.

    • Hi Mike,

      There’s no question that this is an industry that is here to stay. I do have to wonder longer term though with 3D printing becoming more prolific and able how many of us will be printing guns at home. Of course, that’s a question left for time to tell. While looking at these companies I was hoping for slightly better/stable dividend distributions and raises but I guess the nature of the sector doesn’t allow for that.

      One of the frustrating things about writing articles dealing with numbers/stats, etc. is that often you get conflicting EPS, yield, income, growth rates, etc. published. For my numbers I often use Yahoo! Finance, Google Finance, Morningstar, Dividend.com and longrundata.com. However, despite looking at various sources you get different numbers published in each. The 4% yield was from Google Finance.

      From the comments on this article it seems that RGR is the popular pick in this space and while they have a pretty decent dividend history I do agree with you that dividend cuts or freezes may be possible. I guess when you are a dividend investor two things are important when deciding where to invest. First, a company must have the tangible cash on hand to be able to make those payments and second you need a company willing to make those payments. Investing in a cash rich company that does not have a dividend friendly policy is just as bad as investing in a company that distributes a dividend that is unsustainable, at least from a dividend income perspective. Thank you for stopping by and commenting.

  4. DH,

    I looked at a few fire-arm and ammo dividend stocks. For me, right now, the industry is going through a lot of regulation and scrutiny and not sure if that will impact their earnings – hence impact their ability to pay a nice dividend. I almost bought RGR a little while back as well. Great article, always interesting pieces/industries coming from you! Thanks again.

    -Lanny
    Dividend Diplomats recently posted…Top 5 Foundation Dividend Stocks for a PortfolioMy Profile

    • Hi DD,

      I think that regulation and additional control over this industry can potentially affect only a small portion of the revenues of these companies. The vast majority of the guns and ammo sales are to police, military or other government institutions. Also, several of the companies mentioned are quite diversified offering varied products and services from chemical manufacturing to houseware items. Thank you for commenting. Much appreciated.

    • Hi GI,

      Glad you enjoyed my latest article. I have thought about including General Dynamics and Lockheed Martin but figured those are pure play defense stocks whereas the companies mentioned in this article are more traditional small firearms and ammo producers (though some also produce massive weaponry as well). These companies focus more on personal defense products. Thanks for your question and stopping by.

  5. As usual thanks for writing another nice article Divhut!
    I am not a big fan of guns and thinking about guns and wars give me chills but out of your list I would think OLN would be the safest because as I understand chemicals is the main part of their business. But even with all regulations people and government still will buy guns, so I think a small position in RGR would not hurt for diversification I think. Thanks for sharing! It’s always nice to discover new dividend paying stocks!
    Happy Healthy and Wealthy Girl 🙂 recently posted…My Weekly Stock list (10/25)My Profile

    • Hi HHaWG,

      Always happy to oblige the DGI community with inspiring dividend theme articles. As you can see from many of the comments, RGR seems to be the pick most want to go with or have gone with in the past. I think any of these companies would add a certain layer of diversification the “standard” industrial, financial or consumer stocks don’t provide. Unfortunately, the guns and ammo industry is one that will be here for a long time. I am curious to see how 3D printing will affect this industry as the printers become more sophisticated. Thank you for stopping by and commenting.

  6. DivHut,

    Interesting list here.

    A couple of notes:

    RGR is likely to be deleted off the CCC list (per David Fish). Their cumulative dividend payouts this year are on track to be less than last year. Its irregular dividend should be noted.

    NPK pays a special dividend every March and it’s sizable. That raises their effective yield quite a bit.

    Cheers.
    Dividend Mantra recently posted…She Said Yes!My Profile

    • Hi DM,

      I realize that RGR might not be on the CCC list much longer. The reality is that all the companies mentioned in this sector have been paying irregular dividends for some time. I guess this fact is somewhat of a testament to the volatility of this sector. Thanks for clearing up the NPK yield because of its special dividend. And of course congrats on your big announcement. I just read about it on your site.

    • Hi DD,

      From all the comments I have been reading RGR seems to be the popular pick in this sector. The yield will vary greatly though for RGR as they pay out special dividends. One thing that I would like to see in this sector is more dividend payment consistency. Thanks for stopping by and commenting.

  7. Love all of these. Used to live very close to ATK’s headquarters in Arlington, and have invested in OLN and RGR in the past. OLN keeps its dividend constant, no increases, and RGR keeps it steady at a certain percentage of earnings. Ergo, RGR appears to cut it from time to time, but management just does things differently. While not true dividend growth stocks, they’re not really that bad. I will say that RGR is not a SWAN stock; ti’s extremely volatile, which is why I sold it (I think; it was a while ago).
    DividendDeveloper recently posted…Am I Wrong on Telecoms?My Profile

    • Hi DD,

      This is definitely an interesting sector to be invested in. As I mentioned to others who commented, I would like to see more of a traditional dividend growth history with these stocks as opposed to special dividends, freezes or eliminations. You and many others have been invested in RGR at some point only to sell. It seems like these stocks might make great trades but as long term dividend growth investments maybe not as much. You’d think in our world the business of guns and ammo would be a stable one but I guess the bottom line comes down to how management treats cash flow. Thanks for sharing your RGR and OLN experience.

  8. Hi Divhut,

    Intresting list of stocks. I don’t own any of the stocks mentioned above but I do own lockheed martin, which is easier to follow as a foreigner. And it is much easier to buy. In Belgium we only have one small arms company ( FN herstal) and it is owned by one of our 7 governments.

    Cheers,
    G
    Geblin recently posted…Recent buy – Shell ( RDSB)My Profile

    • Hi Geblin,

      Thanks for sharing your ownership of LMT. It’s a great defense stock and has been a solid dividend payer for many years as well. The companies mentioned in this article are mostly smaller arms and ammo suppliers with some larger weapons systems for sale as well. It is an interesting sector to say the least but also one which I was hoping to find a more stable dividend payer. Thanks for stopping by and commenting.

  9. I’m a pretty big fan of gun companies. I have never pulled the trigger (ha..) on a purchase because I just don’t think about it very much with regards to dividends. It seems that there is probably about as much risk of new regulations as there is for smoking companies. It doesn’t really concern me that much to be honest.

    Need to look into RGR, it at least passes a cursory check of my desired dividend traits.

    We shall see!

    Take care
    ILG recently posted…Recent buys of the last few weeksMy Profile

    • Hi ILG,

      Another fan of RGR. If you have been reading the comments it seems that RGR is getting the most love from the dividend blogging community. All of the companies look interesting and well diversified among their offerings as well. Personally, I don’t think regulation will have that much of an effect on many of the companies because a lot of their sales go to government entities such as police or military. Guns and ammo are here to stay. I still am curious to see how 3D printing will affect the industry in the next five to ten years as that technology advances.

  10. DivHut,

    Very interesting. Never thought about looking into the firearms industry. I agree with the increased scrutiny many of these companies will have going forward, but they are definitely still worth a look. All of them have generous PE ratios and either room to grow or decent yields already. Still the industry is only going to keep getting better as gun ownership continues to grow in total numbers, people continue to collect, and the military continues to improve and redevelop its firearms.

    Hmm, if my wife won’t let me get a gun then perhaps I should buy stock in them…

    – Gremlin

    • Hi DG,

      I guess owning stock in some of these companies can be your proxy to owning an actual gun. I can understand the concern some investors may have regarding regulation of this industry however, each company is very diversified into its offerings and personal firearms account for a small portion of the total revenues. Most sales of guns and ammo go to government agencies such as military and police. Still, from a dividend perspective some of these names deserve a second look. Thank you for stopping by and commenting.

  11. Dude this is awesome stuff! as I have said before you think outside the box, and reading posts like this inspires me to do the same. War is a real thing( a damn expensive too), and unless they develop guns that shoot laser beams, bullets are not going anywhere. Until I have my portfolio complete with a solid foundation of blue chips, I cannot wait until i can venture on into buying more unique companies like the ones you have mentioned! I’ll be looking forward to what these companies have to bring.

    Ace
    Dividend Digger recently posted…A Message to all the Young Investors just StartingMy Profile

    • Hi DD,

      While I love writing about the “regular” dividend stocks many of us already invest in, sometimes it’s fun to explore other sectors and dividend paying companies that might not make our portfolios. That doesn’t mean these companies don’t deserve a deeper look and as I have learned from many of the comments, RGR seems to be a popular pick in this space. As you alluded to in your comment, war, terror, etc. is a very real and unfortunate thing we have to deal with and the reality is that guns and ammo will be needed for many years to come. Keep building your core portfolio but also keep your mind open to other dividend investing ideas. Thank you very much for commenting.

    • Hi AnhaInvesting,

      Happy to see you enjoyed this post. As I have mentioned and many others have commented, it seems that RGR is the name most dividend investors like from the companies mentioned in this article. While sales and growth are always important. one cannot discount brand value and RGR definitely has it. Thank you for stopping by and commenting.

  12. RGR is down about 10% today and declared a dividend of $0.14. After this article I put it on my watch list. After initial DD I assumed the company would have no hesitation of cutting the dividend and they did that big time today.

    I dont necessarily this this policy is a bad thing you just need to know what you are getting. Thanks for the idea on RGR. I still think it can be a long term buy/hold but for me I need to observe it a little more.

    • Hi Mike,

      One thing that’s certain is that the market can be very irrational or deliver punishing blows to a stock price which may seem heavy handed. While RGR seems to be rebounding today from its lows one must always consider the future prospects of the dividend. After all, we are dividend growth investors and place a very high importance on those dividends coming in. Look at former dividend stalwarts WFC and GE for example. The thought of a dividend cut seemed totally unlikely, yet after decades of rising dividends they had to cut in order to preserve cash. Look at KO and IBM the last couple of weeks after their tremendous price slide. Look at ARCP yesterday and today. As you said, “you just need to know what you are getting,” which is totally true but sometimes even if you do know what you are getting something from left field comes out of nowhere and blindsides us. As you can see from my portfolio I tend to stay pretty conservative with my holdings. No REITs, MLPs or very high yield stocks. Not that I’m against them, I just like to sleep well at night. Thanks for stopping by.

  13. I had never thought about ammunition in this way but after reading this, I guess it makes a lot of sense to have this sort of dividend on stocks! Definitely a really great way to put down a sort of investment. Thanks for sharing, great post as always, I’m thinking more on that ruger after this!

    • Hi larissa,

      Ammo, firearms and the like are always hot stocks any time Congress wants to introduce a new bill restricting firearm use. It’s kind of a sad commentary about our society but this is a sector of our economy that has continued to do well for many, many decades and most likely will continue on the same path as more individuals look to arm and defend themselves from potentially harmful situations. Simply holding on to any of the names mentioned can provide you with a nice passive income stream too. Thank you for commenting.

Leave a Comment

CommentLuv badge