RTX's $236B Backlog and Dividend Hike: A Dual Engine for Growth and Income

In an era where global markets grapple with inflation, supply chain volatility, and shifting defense priorities, Raytheon Technologies Corporation (RTX) stands out as a rare combination of a high-growth industrial juggernaut and a reliable income generator. With a $236 billion backlog—15% higher than the prior year—and a recent 8% dividend increase, RTX is signaling to investors that it has mastered the delicate balance of scaling for the future while rewarding shareholders. For those seeking a stock that bridges the gap between capital appreciation and consistent income, RTX's latest performance offers a compelling case for long-term inclusion in a diversified portfolio.

The Backlog: A Tailwind for Decade-Long Growth

RTX's $236 billion backlog is not just a number—it's a testament to the company's entrenched position in both the commercial and defense aerospace sectors. The backlog is split into $144 billion in commercial contracts (driven by demand for engine maintenance, avionics, and parts) and $92 billion in defense programs (spanning missile systems, radar, and next-gen propulsion). This duality insulates RTX from economic cycles. While commercial aerospace is cyclical, defense spending is increasingly a permanent fixture in global budgets, with governments prioritizing national security amid geopolitical tensions.

The recent $765 million sale of the Simmonds Precision Products business—part of Collins Aerospace—further streamlines operations, allowing RTX to reinvest in higher-margin technologies. Meanwhile, the company's backlog is bolstered by major wins, such as the $2.5 billion contract for its geared turbofan engines and the $1.2 billion expansion of its NASAMS air defense system for international clients. These contracts not only secure revenue streams but also position RTX as a critical partner in global supply chains.

Financial Resilience and Shareholder Rewards

RTX's Q2 2025 earnings report underscored its financial discipline. Despite a $0.1 billion free cash outflow due to capital expenditures, the company generated $0.5 billion in operating cash flow, a number that will grow as its backlog converts to revenue. This resilience is particularly notable given the headwinds of rising material costs and regulatory shifts. The 8% dividend increase, announced alongside the earnings, reflects confidence in this trajectory. For income-focused investors, RTX's dividend yield of 2.1% (as of July 2025) is attractive, especially when compared to the S&P 500's average yield of 1.5%.

Moreover, RTX's capital return strategy is robust. The company has returned $900 million to shareholders in the first half of 2025 alone, with $7.5 billion in free cash flow guidance for the year. This aligns with a broader trend among industrial conglomerates to prioritize shareholder value—a move that has historically rewarded investors during periods of market uncertainty.

Strategic Positioning in a Shifting Landscape

RTX's strength lies in its ability to adapt. The company's updated 2025 guidance—raising full-year sales to $84.75–$85.5 billion and organic growth to 6–7%—reflects confidence in its ability to navigate tariffs and tax reforms. For instance, the company is leveraging its global manufacturing footprint to mitigate the impact of U.S. tariffs on Chinese imports, while its tax strategy anticipates the benefits of the recently enacted R&D incentives in key markets.

The Raytheon segment, which reported $7.001 billion in Q2 sales, is a prime example of this adaptability. Its 14% adjusted operating profit growth was driven by a favorable mix of high-margin defense programs, including the SPY-6 radar system and the Evolved SeaSparrow Missile. These projects not only contribute to the backlog but also align with the U.S. Department of Defense's modernization goals, ensuring long-term relevance.

The Verdict: A Buy for Patient Investors

While RTX's stock has seen a 12% increase year-to-date (as of July 2025), its valuation remains anchored to fundamentals. At a price-to-earnings (P/E) ratio of 14.5x, compared to the S&P 500's 20x, RTX offers a discount to the market, suggesting undervaluation relative to its cash flow and growth prospects. For growth-oriented investors, the $236 billion backlog represents a decade-long runway for revenue, while the dividend hike provides a safety net during market corrections.

However, risks remain. Tariffs could pressure margins if supply chains become more fragmented, and defense budgets are subject to political shifts. Yet, RTX's diversified portfolio and pricing power—evident in its 11% adjusted EPS growth—suggest these risks are manageable.

Final Thoughts

Raytheon Technologies is more than a defense contractor or aerospace supplier—it's a masterclass in industrial reinvention. By leveraging a $236 billion backlog to fund innovation and shareholder returns, RTX has created a virtuous cycle that benefits both long-term growth and income-focused investors. For those seeking a stock that can weather macroeconomic storms while delivering consistent performance, RTX's recent moves signal that the best is yet to come.

In a market that often prioritizes short-term gains over sustainable value, RTX's dual focus on backlog conversion and dividend growth makes it a standout. As CEO Chris Calio noted, the company's “momentum” is real—and for investors with a multi-year horizon, it's a momentum worth betting on.