Back to top

Image: Bigstock

Why Lockheed Martin (LMT) is a Top Dividend Stock for Your Portfolio

Read MoreHide Full Article

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Lockheed Martin in Focus

Headquartered in Bethesda, Lockheed Martin (LMT - Free Report) is an Aerospace stock that has seen a price change of 9.26% so far this year. The aerospace and defense company is paying out a dividend of $2.6 per share at the moment, with a dividend yield of 2.68% compared to the Aerospace - Defense industry's yield of 0.01% and the S&P 500's yield of 1.32%.

In terms of dividend growth, the company's current annualized dividend of $10.40 is up 6.1% from last year. Lockheed Martin has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.83%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Lockheed's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for LMT for this fiscal year. The Zacks Consensus Estimate for 2021 is $26.32 per share, which represents a year-over-year growth rate of 7.43%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, LMT presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Lockheed Martin Corporation (LMT) - free report >>

Published in