1 Stock Flying Under Everyone's Radar

Building-systems and aerospace giant United Technologies (NYS: UTX) already pays a healthy dividend of 2.6%. Now, with the deal its subsidiary Pratt & Whitney just inked with Rolls-Royce, the way is paved for share price appreciation, as well.

Partnering with Rolls-Royce
In 1983, Germany's MTU Aero Engines, the Japanese Aero Engine Corporation, Rolls-Royce (OTC: RYCEY.PK), and Pratt & Whitney came together to form International Aero Engines, or IAE. IAE focused on designing an engine for the single-aisle commercial airliner market, believed to be the next big thing.

And it was. In 1984 Airbus came out with single-aisle A320. The engine selected for what would become one of the world's most ubiquitous airliners was IAE's brand-new V2500.

Unpartnering with Rolls-Royce
In 2010, with rising fuel prices squeezing airlines around the world, the call went out for a more fuel-efficient aircraft. The A320, workhorse of airline fleets everywhere, was still flying, and so was the V2500.

Debate between Pratt & Whitney and Rolls-Royce developed regarding whether to upgrade existing aircraft with newer, more fuel-efficient engines, or wait until a new generation of commercial aircraft, designed from the ground up for better fuel efficiency, was available. Airbus tried to make up everyone's mind for them by announcing the A320 New Engine Option, or A320neo, a re-engined version of the existing A320.

Pratt & Whitney was ready to throw all its efforts into the A320neo and had an engine ready to go: its brand-new PurePower Geared Turbofan. But Rolls-Royce was interested in developing engines for the next generation of commercial airliners.

Repartnering with Rolls-Royce
The solution? Pratt & Whitney has announced it will buy out Rolls-Royce's share of IAE for $1.5 billion.
At present, Airbus has a staggering 1,000 orders on hand for the A320neo. This unexpected success has caught rival Boeing (NYS: BA) so off guard it's pursuing a re-engined version of its own single-aisle aircraft at the expense of its next-generation model.

With one less partner in IAE, suddenly Pratt & Whitney stands to make a lot more money off those 1,000 plus standing engine orders. And with the price of oil not going back to 1983 prices anytime soon, there's likely even more replacement engine orders on the way. Suddenly, the $1.5 billion Pratt & Whitney is paying for Rolls-Royce's share of IEA looks very reasonable.

To boot, at the same time this classic Pratt & Whitney/Rolls-Royce partnership is being laid to rest, a new one is being born. As part of the buyout announcement, the two companies are announcing a joint venture to build engines that will power the next generation of single-aisle aircraft. Demand is expected to be 20,000 aircraft, or 45,000 engines, over the next 20 years.

And Pratt & Whitney will still be involved in servicing the 4,000 plus V2500 engines still in use around the world.

Come fly the Foolish skies
"This looks like a good deal for both parties," Rob Stallard of RBC Capital Markets told the Financial Times, "allowing them to focus on their current engine priorities while laying the groundwork for the successor to the V2500."

Well put. The two companies had been at each other throats for a while, sometimes publicly, hurting what had always been a friendly and profitable relationship. This set of moves benefits both companies, letting them get on with exactly what they want to get on with. And most importantly for the current or prospective UTX investor, Pratt & Whitney has struck a great deal, one that could significantly increase revenue for itself and its parent company, and turn an already solid dividend player into a fine growth stock.

Couple this move with the recent purchase of Goodrich (NYS: GR) and it's easy to see that United Technologies is a good dividend buy that's just getting better. For more great dividend buys, check out our free report detailing 13 high-yielding stocks our Foolish analysts have discovered. Get your copy while it's still free and available.

At the time this article was published Fool contributorJohn Grgurichis currently powering his VW Beetle with a V2500 that fell off a passing A320, but he owns no shares of any of the companies mentioned in this column. The Motley Fool owns shares of Lockheed Martin.Motley Fool newsletter serviceshave recommended buying shares of Spirit AeroSystems Holdings. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has an absolutely scintillatingdisclosure policy.

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