TransDigm: The "Nondividend" Stock That's Quietly Returned Billions to Shareholders

Key Points TransDigm generates EBITDA margins above 50%, rivaling software companies despite being an aerospace supplier. The company has paid nearly $250 per share in special dividends since 2019. Trading at 32x forward earnings with near-term margin compression ahead, investors are paying up for quality. 10 stocks we like better than TransDigm Group › TransDigm Group (NYSE: TDG) doesn't show up on dividend stock screens, yet it has quietly returned more capital to shareholders than many traditional dividend payers. Since 2019, the aerospace component supplier has paid out $248.50 per share through special dividends, an overlooked return stream that has quietly rewarded patient shareholders while the company built one of the most profitable businesses in its industry. The sole-source advantage and aftermarket gold mine TransDigm's strategy is straightforward: corner the markets for specialized aircraft parts that are easy to overlook, but impossible to do without. The company has executed this playbook for a long time, acquiring 93 businesses since 1993 to build dominant positions in niche markets that most companies ignore. These markets include components such as latches, valves, ignition systems, and actuators that keep planes flying. What makes the business model so simple yet effective is that roughly 80% of TransDigm's sales come from parts where it's the sole supplier, and 90% of its products are proprietary. Once a TransDigm component is certified on an aircraft platform, it typically stays there for the plane's 25-to-30-year lifespan. FAA certification creates switching costs so high that replacing a TransDigm part requires costly recertification that airlines rarely pursue. The real gold mine is the aftermarket. While sales here make up roughly half of TransDigm's revenue, they deliver about three-quarters of total profits, thanks to margins that dwarf the original equipment business. The economics work in TransDigm's favor: When a grounded plane costs millions per day, paying a premium price for a critical replacement part becomes an easy decision. TransDigm maintains extensive global inventories to ensure parts arrive fast, an expensive strategy that works because customers are willing to pay premium prices for speed and reliability. TransDigm's pricing power is evident in its earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, which came in at 54% in fiscal 2024.

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The overlooked special dividend story