Booz Allen Hamilton: Buy For Double-Digit Dividend Growth

Booz Allen Hamilton Holding Corporation (NYSE:BAH) stock price has gone nowhere in more than 1-year. I last wrote about Booz in June 2020, and the stock price has been flat since then. The stock price is down (-7%) year-to-date as of this writing. Booz is underperforming the market by a wide margin in 2021 due to overvaluation in 2020 and slower top-line growth. Indeed, consensus FY2022 estimates are lower than FY2021 earnings per share. Investors are also likely concerned about potentially slower spending growth on government services in 2021 and the next few years. However, Booz is a market leader in an industry where relationships, expertise, and experience matter. Booz is a Dividend Challenger, and the dividend is growth at a double-digit rate. The company is not a deal, but Booz is trading at the lowest valuation in over 1-year. I view Booz as a long-term buy.

Overview of Booz Allen Hamilton

Booz Allen Hamilton was founded in 1914. The company was privately held until the IPO in late-2010. Booz is a leading provider of professional management and technology consulting services to the US Government. Technology consulting services include information technology, cybersecurity, cloud computing, and engineering services. The company provides staffing to US Government clients. Booz operates in four business groups: Defense, Intelligence, Civil, and Innovation. Booz has over 28,000 employees, of which over 25,000 are consultants to clients. About 97% of total revenue is from contracts where the US Government. Revenue was 49% defense, 28% civil, 20% intelligence, and 3% global commercial in FY21, as seen in the chart below. The company had approximately $7.86 billion in revenue in FY21.

Booz Allen Hamilton Long-Term Growth

Booz continues to generate long-term revenue and dividend growth by increasing its consulting headcount. Revenue is dependent on providing staffing to US Government clients. The more contractors that Booz delivers, the greater the revenue…

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