Lockheed Martin + 3 Large Caps Lure with Dividend Hikes

Global macroeconomic and geopolitical unsteadiness have led to an urgent need of dividend-paying defensive stocks. They have a distinct characteristic of non-cyclicality, i.e., their performance is not overly allied to the larger economy. In particular, large-cap companies that offer products and services with a relatively inelastic demand provide steady returns. Moreover, the very fact that they consistently boost their dividend payouts shows the confidence they have in their earnings growth potential.

Hence, companies with broad economic moats accompanied with inelastic demand for their products almost guarantees long-term earnings growth. The recent no-rate-hike decision from the Federal Reserve has also made dividend paying as well as raising stocks alluring.

Let’s take a closer look at four U.S. stocks that have recently hiked dividends.

Lockheed Martin Corp. LMT

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs.

On Sep 24, the company increased its quarterly dividend yesterday by 10%, bringing the annualized payout to $6.60 per share from $6.00 per share earlier. This is the 13th consecutive annual double-digit increase in Lockheed Martin’s quarterly dividend rate. Along with that, this defense behemoth has also increased its share repurchase authorization by $3 billion.

A politically unstable planet will ensure that the arms merchants are not out of business. Moreover, the company has fared well in spite of U.S. defense budget cuts over the last couple of years. Earnings for the prime contractor increased about 10.1% in the second quarter of 2015 as it witnessed higher fighter jet demand. The solid first half performance has also enabled it to lift its 2015 outlook for operating profit and earnings.

Market Cap: $63.59 billion
Dividend Yield: 3.2% versus 1.39% for the industry
Payout Ratio (TTM): 51.51% versus 28.60% for the industry
Zacks Rank #2 (Buy)

Microsoft Corp. MSFT

Microsoft is one of the largest software companies in the world. It has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide.

On Sep 15, Microsoft raised its quarterly dividend by 5 cents or a robust 16.1% to 36 cents per share, from the prior level of 31 cents. This is higher than the 11% increase last year. The tech giant has increased its dividend payout in each of the past nine years, barring 2009.

Market Cap: $351.19 billion
Dividend Yield: 3.28% versus 2.35% for the industry
Payout Ratio (TTM): 82.53% versus 57.92% for the industry
Zacks Rank #3 (Hold)

Williams Companies Inc. WMB

Tulsa, OK-based Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transporting natural gas.

Pipeline operator Williams Companies has announced an increase in its quarterly cash payment on Sep 11 at a time when many energy sector companies have been forced to either cut or suspend payouts to mitigate financial woes. Williams has declared a third-quarter 2015 dividend of 64 cents per share ($2.56 annualized), up 14% from the prior-year quarter and 8.5% sequentially. It has been consistently paying and increasing dividends over the past several years.

Williams Companies also has plans to acquire its affiliate Williams Partners WPZ that will result in an expanded portfolio and greater strength for the combined entity. With the acquisition, Williams Companies is expected to become one of the largest and fastest growing dividend-paying companies.

Market Cap: $31.35 billion
Dividend Yield: 6.12% versus 3.15% for the industry
Payout Ratio (TTM): 83.75% versus 50.17% for the industry
Zacks Rank #3

Verizon Communications Inc. VZ

U.S. telecom behemoth Verizon Communications has a strong foothold in the wireless market and expects growth from higher market penetration of 4G LTE services.

On Sep 3, Verizon’s board of directors approved a 2.7% hike in its quarterly cash dividend to 56.5 cents per share from 55 cents paid earlier. This marked its ninth consecutive annual hike.

Market Cap: $179.26 billion
Dividend Yield: 5.13% versus 2.69% for the industry
Payout Ratio (TTM): 91.25% versus 3.13% for the industry
Zacks Rank #3

Bottom Line

No matter how volatile the global markets appear right now, it appears to be a good approach to focus on dividends as they could justify a place in any portfolio. Backed by good fundamentals, these large-cap companies ensure stable payouts, always a cushion for yield-hungry investors.

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WILLIAMS COS (WMB): Free Stock Analysis Report
 
WILLIAMS PTR LP (WPZ): Free Stock Analysis Report
 
MICROSOFT CORP (MSFT): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
 
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