RTX vs. GD: Which Pentagon-Backed Dividend Will Outperform Over the Next Decade?

A retirement-focused investor might wonder whether to own RTX (NYSE:RTX | RTX Price Prediction) or General Dynamics (NYSE:GD) right now. Both stocks have fallen over the past month. RTX is down 8.02% and GD is down 9.33%. That fall came even though the Pentagon’s FY2027 request calls for $1.45 trillion in total spending. Barron’s reported that RTX shares fell despite billions in Pentagon spending. With prices lower, the choice comes down to business mix.

Business Mix Shows Which Payout Rests on Pentagon Money

RTX is often called a defense prime, but most of its revenue comes from aviation. In the second quarter, Pratt & Whitney brought in $8.89B and Collins Aerospace brought in $8.21B. Raytheon, the missile and defense unit, brought in $8.27B. Pratt’s commercial aftermarket sales rose 25%. That aftermarket business makes money while airlines fly a lot. It also links RTX to the airline cycle and to the GTF engine powder metal problem.

GD’s main business outside defense is Gulfstream. Its Aerospace segment produced $3.53B of $14.09B in total revenue. Marine Systems ($4.66B), Technologies ($3.62B) and Combat Systems ($2.29B) make up the rest, and they mostly depend on government budgets.

Dividend Yield and Safety: General Dynamics Wins

GD yields 1.86%, compared with 1.49% for RTX. GD’s quarterly dividend is $1.59, up from $1.02 in 2019. The payout has risen every calendar year since 2007. RTX has a weaker record. Its quarterly payout dropped from $0.735 to $0.475 in 2020, the year United Technologies spun off Carrier and Otis and merged with Raytheon. It has climbed back to $0.73 since then.

Both companies generate enough cash to cover their dividends. RTX expects $8.50–$8.75B of free cash flow this year. CEO Chris Calio said: “A commitment to the dividend, for sure.” GD turned operating cash flow equal to 162% of net earnings in the second quarter. It also paid off $500 million of maturing notes with cash and ended the quarter with net debt of just $3.2 billion. GD wins on both yield and track record.

Growth Outlook: RTX Wins

RTX’s second-quarter revenue rose 14.49% to $24.71B. Adjusted EPS of $1.89 exceeded the $1.66 consensus. Backlog reached $289B, up 22%. Management raised its full-year adjusted EPS guidance to $7.10–$7.25.

GD’s revenue grew 8.07%, and EPS of $4.24 beat the $3.97 estimate. Its backlog rose 32% to $136.5B with a 1.4x book-to-bill ratio, meaning it booked more new orders than it billed. Still, Combat Systems grew only 0.3%. Year-over-year quarterly earnings growth was 28.7% at RTX and 13.4% at GD, so RTX is growing faster.

Valuation: General Dynamics Wins

GD is priced at 18 times forward earnings. RTX is valued at 25 times. On trailing earnings, GD is at 20 and RTX is at 33. Enterprise value to EBITDA, which compares total company value with operating cash earnings, is 14.57 for GD and 17.9 for RTX. GD shares are down 1.5% over the past year, while RTX shares are up 12.47%. Investors have already paid up for RTX’s growth.

Verdict: General Dynamics Is the Retirement Pick

General Dynamics wins two of the three categories, and those two matter most to a retiree living on portfolio income. The company has the higher yield, the steadier increase history and the cheaper valuation, and most of its revenue comes from government programs. For retirees who need reliable income, GD offers the stronger profile. The next $1.59 payment goes out on November 13.

RTX matches a different investor: someone still 10 years or more from retirement who wants growth more than income. Its 10-year gain of 314.46% beats GD’s 166.66%, and its $289B backlog supports more growth. For a portfolio that has to pay the bills today, General Dynamics offers the stronger income profile.

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