Industry Overview - Military expenditure has significantly increased this year due to ongoing conflicts in Ukraine and Gaza, as well as potential tensions between the United States and Venezuela, attracting investor interest in the defense sector [1] - The NYSE Arca Defense Index has risen by 41.96% year-to-date, outperforming the S&P 500 Index, which has gained 17.21% during the same period [1] Emerging Trends - Traditional defense contractors are expanding their capabilities through mergers and acquisitions of smaller firms specializing in next-generation military technologies, such as AI-powered drones [2] - There is a bullish outlook for aerospace and defense stocks, with rising demand outpacing supply, as noted by Morgan Stanley [3] Investment Methodology - The article identifies defense stocks that have paid dividends for at least 10 consecutive years and ranks the top 7 based on the number of hedge fund investors holding stakes in them [5] Notable Defense Dividend Stocks - **Textron Inc. (NYSE:TXT)**: - Number of Hedge Fund Holders: 36 - Citigroup initiated coverage with a Neutral rating and a price target of $91 [7] - The company has consistently paid dividends for over three decades, with a recent quarterly dividend of $0.02 per share [9] - **Huntington Ingalls Industries, Inc. (NYSE:HII)**: - Number of Hedge Fund Holders: 39 - Citigroup initiated coverage with a Buy rating and a price target of $376 [11] - The company has increased its dividend payout every year since 2013, with a current yield of 1.56% [12]

Core Insights - HII's Ingalls Shipbuilding division has been awarded a contract by the U.S. Navy to design and build the future small surface combatant (SSC) ship, utilizing the design of the proven Legend-class national security cutter (NSC) [1] - The Ingalls team is currently engaged in building three classes of ships and modernizing Zumwalt-class destroyers, demonstrating their capacity and expertise in shipbuilding [2] - HII has invested over $1 billion in infrastructure and partnerships to enhance shipbuilding capabilities and explore the addition of a new shipyard in the U.S. [3] Company Overview - HII is recognized as the largest military shipbuilder in the U.S., with a history of over 135 years in advancing national security [5] - The company employs a workforce of 44,000 and provides a range of capabilities from ships to unmanned systems and advanced technologies [5] - HII's mission focuses on delivering powerful ships and solutions to support national defense and global peace [4]