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Consulting Firm, Booz Allen Hamilton, Declares Its First Dividend

February 06, 2012 – Comments (1) | RELATED TICKERS: BAH , ACN , IBM

Last week, Booz Allen Hamilton (NYSE: BAH) declared its first quarterly cash dividend. The initiation of a dividend is a good indication that Booz Allen’s management is very confident with the company’s current position and confident about the company’s future growth prospects.

The dividend yield is 2.03% at today’s prices. The payout ratio is expected to be only about 20% (giving Booz Allen plenty of room to further grow the dividend in the future).

In 2008, Booz Allen Hamilton was spun-off from its parent company. Until very recently, Booz Allen Hamilton was under three-year non-compete clause with its former parent. That non-compete clause confined the company to offering its consulting services only to the US-government (while its former parent company was free to offer its services to domestic and international private-sector companies and to governments outside of the United States).

That non-compete clause expired on July 31, 2011. Booz Allen Hamilton is now free to expand its presence outside of the US-government public-sector. The company will now begin to offer its consulting services to domestic and international private-sector companies and to government-entities outside of the US.

I believe Booz Allen Hamilton is currently being overlooked. The company should do very well in the coming years. Its return to the private-sector and international government-entities will bring with it greater profits. Additionally, private-sector consulting will give the company exposure to much higher-margin oppurtunities (compared to public-sector consulting). These factors should help pave the way for Booz Allen Hamilton to raise the dividend in the future.