LMT- A Dividend-Paying Defense Giant for Today's Troubled World
Several dividend-paying defense stocks offer refuge amid Russia’s raging war against Ukraine, one that has led Western nations to provide military hardware to repeal the ongoing invasion of a sovereign nation. One of my favorites is Lockheed Martin (LMT), explains Paul Dykewicz, editor of DividendInvestor.com.
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Lockheed is a global security and aerospace company that showed resilience after negative media reports following the release of financial results in July. A key concern was the slowdown in F-35 delivery/revenue due to lower short-term demand from the Air Force and some certification issues.
However, when Lockheed Martin’s earnings were announced, the Book-to-Bill ratio for the missile and missile defense system segment grew by 24% to a ratio of 3.3 times. In the defense industry, it takes time to realize revenue after it is booked, or the order is taken, said Michelle Connell, who heads Dallas-based Portia Capital.
Lockheed Martin’s management announced that 2023 would be a transition year, and the statement appears to be accurate, Connell said. The current hot spot for LMT is the space segment.
Connell, who said she views Lockheed Martin as a stock to own, touted the company’s July quarter growth of 12% year over year, with revenues of $341 million. Lockheed Martin has “strong fundamentals” with a weighted average cost of capital of just 6% and a return on invested capital of 16%.
Lockheed Martin’s dividend yield recently was 2.64%. In the last three years, the dividend has grown more than 8%.
The company’s management raised guidance in July for sales and profits. For the year, earnings are expected to increase 2%, but earnings per share (EPS) are estimated to jump 23%. The difference comes from continued share repurchases.
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Finally, the US Department of Defense (DoD) recently issued multiple billion-dollar contracts for supporting munitions replenishment, featuring notable wins for Lockheed Martin. Examples include $4.7 billion for Lots 18 and 19 of the Guided Multiple Launch Rocket Systems (GMLRS), $2.4 billion for Patriot missile production, and a $750 million contract for Lot 21 of the Joint Air-to-Surface Standoff Missile (JAASM).
Recommended Action: Buy LMT
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