Allison Transmission Hikes Dividend: How to Play the Stock Now?

Allison Transmission Holdings ALSN announced a 7% increase in its quarterly dividend, raising it to 29 cents per share from 27 cents. The new dividend will be paid on March 20, 2026, to shareholders of record as of March 9. This marks the seventh consecutive year of dividend increases, reinforcing management’s commitment to disciplined capital allocation and shareholder returns.

ALSN reported fourth-quarter 2025 earnings of $1.70 per share, which declined 15.4% year over year. Total revenues decreased 7.4% year over year to $737 million.

Let’s examine the company’s growth prospects and risks.

Allison Gains From Defense Growth and Global Expansion

Allison is well positioned to benefit from rising global defense budgets. Defense sales rose 26% year over year in 2025, supported by expanding programs in the United States and abroad. The 3040MX platform is emerging as a key growth driver. It was selected for India’s FICV program, representing more than a $100 million opportunity over 20 years. The company secured a new contract to supply 3040MX cross-drive transmissions for Poland’s Infantry Fighting Vehicle program. Continued momentum in defense, primarily outside North America and non-U.S. government, is now generating revenues. Allison's recent partnership with Armoured Vehicles Nigam Limited supports the company’s current and future programs.

International expansion represents a major long-term growth opportunity. International On-Highway remains one of Allison’s largest untapped opportunities, with low penetration levels and significant room for growth across regions. In the North American On-Highway end market outside its core operations, the company achieved record fourth-quarter revenues, contributing to a full-year record of $507 million. The acquisition of Dana’s Off-Highway Drive & Motion Systems Business, completed in January 2026, added a broader global footprint and expanded access to additional customers and markets.

Allison’s focus on advanced technology and continued innovation in product development augur well. Customer wins, such as PACCAR standardizing Neutral-at-Stop on Kenworth and Peterbilt models, reinforce the value of Allison’s fuel-saving features. Allison’s eGen Power portfolio, comprising 100S, 100D, 130S, 85S and 130D e-axles, demonstrates its ability to adapt to the changing auto-industry dynamics. In particular, the eGen Flex portfolio and the eGen Force portfolio are driving Allison’s prospects. Allison’s eGen Force has been chosen by American Rheinmetall for the Optionally Manned Fighting Vehicle program, now in development, with U.S. testing set for 2026 and production starting in 2029. The company will continue to invest in businesses to drive long-term growth and innovation, while maintaining disciplined capital allocation and a strong financial position.

Upbeat 2026 outlook sparks optimism. The company expects 2026 net sales in the range of $5.575-$5.925 billion, up from $3.01 billion in 2025. It projects consolidated adjusted EBITDA of $1.365-$1.515 billion for 2026, up from $1.130 billion in 2025, with adjusted EBITDA margins expected between 27% and 29%.

Conclusion

Allison presents a balanced opportunity for investors seeking both income and long-term growth. The company has raised its dividend for seven consecutive years, reflecting stable cash flow and a consistent approach to capital allocation. Although recent quarterly earnings declined, its strong presence in the defense market offers steady, multi-year revenue potential as global military spending continues to rise. Programs tied to its 3040MX and eGen platforms provide meaningful growth over time.

The company is expanding beyond North America and strengthening its global footprint through the Dana off-highway acquisition. At the same time, it is investing in electric and advanced drive technologies to remain competitive as the industry evolves. Management’s optimistic 2026 outlook for higher sales and improved profitability further supports the growth story. With dependable dividends, defense exposure and expanding international opportunities along with a Zacks Rank #2 (Buy), Allison may be a solid addition to a diversified long-term portfolio.

Allison Transmission Holdings, Inc. Price, Consensus and EPS Surprise

Allison Transmission Holdings, Inc. price-consensus-eps-surprise-chart | Allison Transmission Holdings, Inc. Quote

Other Stocks to Consider

Some other top-ranked stocks in the auto space are RENAULT RNLSY, Modine Manufacturing MOD and Strattec Security STRT, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RNLSY’s 2026 sales and earnings implies year-over-year growth of 14.4% and 176.3%, respectively. The EPS estimate for 2026 and 2027 has improved 34 cents and 18 cents, respectively, in the past seven days.

The Zacks Consensus Estimate for MOD’s fiscal 2026 sales and earnings implies year-over-year growth of 21.3% and 19%, respectively. The EPS estimate for fiscal 2026 and 2027 has improved 19 cents and 89 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for STRT’s fiscal 2026 sales and earnings implies year-over-year growth of 2.1% and 16.2%, respectively. The EPS estimate for fiscal 2026 and fiscal 2027 has improved $1.01 and 48 cents, respectively, in the past 30 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research