A stock that’s delivered a 10-year average annual total return of 22.88% while also frequently paying a 6% to 7% starting dividend yield?

It actually exists. And it’s not some obscure, illiquid microcap, either.

TransDigm Group Incorporated ($TDG) is a multibillion-dollar company listed on the New York Stock Exchange. It’s also both a high-yield stock and a market-beater. However, due to the nature of its distributions, this stock is rarely picked up by dividend screeners.

TransDigm Group manufactures niche aerospace components. These are mostly proprietary products, such as AmSafe seatbelts, which are used on most commercial airliners and private jets. Other products are more technical, including relay panels and electromechanical actuators. In many cases, TransDigm is the sole provider of these systems.

As a niche aerospace supplier, the company trades at a premium.

TransDigm is currently valued at a price to earnings ratio of 33.17. However, the company has consistently outperformed the S&P 500 over the long run, justifying at least some of that premium valuation.

Over the past decade, TransDigm delivered an average annual total return of 22.88%, turning an initial $10,000 investment into more than $78,000.

Zooming out even further, TransDigm has delivered a 20-year average annual total return of 28.73%. So this isn’t just a case of the company benefiting from a particularly strong decade. TransDigm has consistently outperformed the market for many years.

Additionally, this is a dividend stock.

While TransDigm doesn't pay a fixed quarterly dividend, it typically issues an annual special distribution. And these payouts are often quite large, giving new shareholders a 6% or 7% starting yield. For example, in 2024, the company paid a one-time special dividend of $75 per share. With the stock trading at around $1,200 for most of the year, that equated to a dividend yield of about 6.2%.

Last year, TransDigm paid a $90 per share special dividend.

Near the firm's 2025 ex-dividend date, the stock traded for around $1,270 per share. In other words, new investors received a 7.08% yield that year.

While these dividends aren’t guaranteed, they have generally increased over the long term.

According to TransDigm Group's President and Chief Executive Officer, Kevin Stein, "Our regularly stated goal is to deliver returns to shareholders that are comparable to those of well performing private equity funds, while offering the liquidity of a public market."

So, during down years or weaker economic environments, TransDigm may skip paying a special distribution. This happened in 2020 and 2021. However, the company does this to preserve its balance sheet and allocate capital where it sees the greatest opportunity. It’s a strategy that has clearly worked because, even without special distributions in 2020 and 2021, TransDigm still delivered a market-beating 10-year average annual total return.

I view this as an interesting high-yield stock that, while not guaranteed to pay a special distribution every year, has the potential to provide strong long-term income and capital appreciation.

And with TransDigm shares slightly down year to date, I’d be interested in buying the stock.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.