There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

March 24, 2009 - Raytheon Company (RTN-NYSE) designs, develops, manufactures, integrates, and supports technological products, services, and solutions for governmental and commercial customers in the United States and internationally. It operates in six segments: Integrated Defense Systems (IDS), Intelligence and Information Systems (IIS), Missile Systems (MS), Network Centric Systems (NCS), Space and Airborne Systems (SAS), and Technical Services(TS).

The IIS segment provides signal and image processing, geospatial intelligence, air- and space-borne command and control, ground engineering support, weather and environmental management, information technology, identity management, and information assurance services.

The MS segment develops and supports a range of cutting edge weapon systems that include missiles, smart munitions, projectiles, kinetic kill vehicles, space vehicles, and directed energy effectors.

The NCS segment develops and produces mission solutions for networking, command and control, battle space awareness, and transportation management. This segment's principal programs comprise command and control systems, integrated communications systems, netted sensor systems, and homeland security, as well as civil applications and components to create these systems.

The SAS segment provides integrated systems and solutions for advanced missions, including surveillance and reconnaissance, precision engagement, unmanned aerial operations, and special force operations and space.

The TS segment offers technical, scientific, and professional services, as well as a range of training and outsourcing services. This segment specializes in mission support, counter-proliferation and counter-terrorism, range operations, product support, and customized engineering services. The company was founded in 1922 and is based in Waltham, Massachusetts.

Raytheon recently lost some ground, cracking from its all-time high of $67.50 to a little less than half of that, even though earnings are predicted to grow. The reason for the dramatic sell-off: most likely investors are afraid the new administration will make large cuts in military spending in the coming years. While the new President appears to have accepted the 4% increase for defense spending in the current budget, it's the extraordinary needs of the domestic economy that may change his mind, channeling some of those funds into domestic projects and out of the defense budget. At least that would seem to be the reason for the stock's price problems.

Having said that, the earnings are going in the opposite direction. For the last 5 years, they've increased an average of 15.5% annually with analysts seeing growth of 11.5% a year, on average over the next 5. In 2006, earnings per share (eps) were $2.56, then jumped to $3.31, followed by $3.95. This year, expect $4.63 and next year $4.97, if the defense budget stays intact.

Last year, sales were up 9% while eps went up 19%. At the end of the year, order backlog was at $38.9 billion, an increase of more than 6% over 2007. With contracts that run for several years, continued sales and existing commitments from the U.S. and its allies, earnings should be on track for at least two more years, unless the President makes major changes.

Other bright spots: the balance sheet. Long-term debt is only 20% of total capital. There is no short-term debt, hasn't been since 2007. With strong cash flow, the company has been buying back stock. In the last 4 years, it's purchased $4 billion worth. Look for the buying to continue. There are 400,100,000 shares outstanding. Another use of funds: increasing the dividend, something done every year since 2004. Analysts expect the increases to continue for at least the next 3 to 5 years. It's $1.12 now for a yield of 3.2%.

More numbers: Trailing P/E is 9; Forward P/E is 7.16. Price to sales is .61. Price to Book is 1.56. Operating margin was 11.2 in the last 12 months; Profit margin was 7.22. Return on Equity was 15.5%. Total cash is $2.26 billion. Total debt is $2.31 billion. Debt to Equity is .25. Current ratio is 1.44. Book Value per share is $22.71.

Raytheon has shown it can make good profits. Clearly, the ramp in the Defense budget in the Bush administration helped. Investors are apprehensive about how much the new administration will change the Defense department and its budget. So far, there have been no changes. But it's a young administration.

The stock has moved down in spite of good earnings news. It will take some time to see what changes will occur and how they'll affect RTN. As investors wait to see how developments unfold, the company will most likely continue to buy back stock and raise the dividend without impairing its balance sheet.

- Company Web site: www.raytheon.com

- Ted Allrich