Better Buy: Raytheon vs General Dynamics

It's been a banner year for defense stocks, as a favorable political climate coupled with an increase in geopolitical risk has caused shares of defense giants to outpace the S&P 500's 13% year-to-date gain. Raytheon (NYSE: RTN) and General Dynamics (NYSE: GD) have both enjoyed strong stock performances, up 33% and 24%, respectively.

Defense spending shows no signs of tapering. At these valuations, though, investors need to be picky about what they buy. Here's a comparison of Raytheon and General Dynamics to try to determine which is the smarter pick right now.

There are no bargains to be found among large-cap defense suppliers. Raytheon is currently trading at 25.97 times trailing 12-month earnings, compared to 21.10 times for General Dynamics. Both companies' multiples are higher than they have been for a decade. On a price-to-sales basis, both companies are again trading at levels unmatched in recent history. Both have similar dividend yields and each has a history of growing that dividend over time.

Source: Fool.com