Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

A Smart Way to Look at Anti-Terrorism

When attempting to find stocks to play via macro-secular trends, one that may cross you mind is anti-terrorism, sometimes known as counter-terrorism. In the United States, the definition of a terrorist act is loose, but generally encompasses all organized threats against the state—ongoing or perceived—from individuals or a group of individuals. According to a U.S. News and World report, there have been over 300 American deaths from “political violence and mass shootings since 9/11,” and the Heritage Foundation reports that 40 terrorist attacks have been prevented since the 2001 attack on the World Trade Center.

The point is, there’s a clear case to be made that anti-terrorism efforts in the U.S. are here to stay, and thus, investors have a long-term theme to play if they so wish. As part of our coverage of dividend stocks here at Insider Monkey, one approach we’ve been using recently is what we like to call catalyst-dividend investing, or Cat-Div investing for short. The goal of this method is to choose dividend-paying stocks by first looking at an overarching economic premise, and then parse down the ways stock market investors can gain exposure.

In the case of anti-terrorism, which can be classified as a sub-industry of the defense industry, there are some stocks that should pique income investors’ interest, specifically in the electric and biochemical-monitoring arena. Let’s take a look.

Barack Obama serious

Electronic and biochemical monitoring

The electronic surveillance space is filled with large-cap defense companies like Raytheon Company (NYSE:RTN), Lockheed Martin Corporation (NYSE:LMT) and Northrop Grumman Corporation (NYSE:NOC). Raytheon offers monitoring products for warships, jamming equipment, command and control capability to oversee battlefields (including the electromagnetic-equipped SIGINT system), and radar warning receivers. The company pays a dividend yield of 2.8% at a payout ratio of 35%.

Lockheed Martin and Northrop Grumman, meanwhile, pay yields of 3.6% and 2.6% respectively, with payout ratios of 49% and 27%. Lockheed offers many of the same e-surveillance products as Raytheon in terms of scope, and its “Space Fence” technology will soon allow the U.S. Air Force to monitor outer space.

Northrop Grumman offers several different technologies used for homeland security, including most notably the Mobile Chemical Agent Detector, or MCAD. The MCAD “detects chemical warfare agents and toxic industrial chemicals within a 5 kilometer radius,” according to the company.

CECO Environmental Corp. (NASDAQ:CECE) and STERIS Corp (NYSE:STE) are two smaller companies that focus solely on biochemical monitoring and prevention, with the latter paying a dividend yield near 2% at a payout ratio of 27%. Ceco pays a yield of 1.5% at a payout near 20%.

Making a play

Essentially, the publicly traded companies in this space can be broken down into two groups. The larger players like Lockheed and Northrop offer revenue diversification, generally higher yields and less volatility, while the small-caps Ceco and Steris pay lower dividend yields, are a bit more volatile (not much in terms of beta), and are focused on the biochemical side of the industry.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.