Back to top

Analyst Blog

Aparajita Dutta

Lockheed Martin: Dividend Up 10.3%, Share Buyback by $2B

LMT EGL

Trades from $3

In a bid to reward its valuable investors, Lockheed Martin Corp. (LMT - Free Report) has once again declared a handsome hike in its quarterly dividend. In the fourth quarter of 2016, the company will pay a dividend of $1.82 per share, up 10.3% from the previous dividend of $1.65.

This makes the company’s annualized dividend worth $6.77 and the consequent dividend yield comes to 2.75%, based on its current price of $246.62.

Interestingly this marks the 14th year in a row when this defense prime has increased its quarterly dividend rate by 10% or more. Management will pay the surged dividend to its shareholders, of record as of Dec 1, 2016; on Dec 30, 2016.

Surely this came in as a significant boost for investors as is evident from the 1.2% surge observed in Lockheed’s share price, following the release of the news.

 The Hiked Share Repurchase Plan

Meanwhile Lockheed Martin’s management also authorized additional share repurchase of $2 billion, bringing the company’s total authorization value to $4.3B for future share repurchases, under its current program.

We note that, during the six months that ended on Jun 26, 2016, Lockheed Martin repurchased 4.5 million shares of its common stock for $1 billion. At that time the company was left with a share repurchase authorization of $2.6 billion.

However, the company is keeping under wraps the number of shares it has purchased so far, and the associated timing of the purchases.

Our View

No doubt the above two announcements that Lockheed Martin has recently made is indicative of the strong capital structure it currently bears. In fact, a meticulous study of the company’s recent cash flow statement reveals the generous amount of cash Lockheed generates; its industry-leading combat equipments have made it the largest defense contractor in the U.S.

Lockheed Martin had returned $5 billion to its stockholders in 2015, the highest amount in the company’s history, representing 120% of its free cash flow for 2015. The company continued with this trend in its last reported quarter as well. In the second quarter of 2016, the company paid dividends of $501 million and repurchased shares worth $501 million, totaling a value of over $1 billion that it returned to its stockholders.

Considering the strong financial position Lockheed Martin currently holds, and the several major contracts that it has been winning; we expect to witness similar dividend hike episodes on the company’s part going forward.

Zacks Rank and Stocks to Consider

Lockheed Martin currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the aerospace and defense sector include Engility Holdings, Inc. (EGL - Free Report) , Leidos Holdings, Inc. LDOS and Ducommun Inc. DCO.

Engility sports a Zacks Rank #1 (Strong Buy) and has witnessed a 2.32% surge in its last day’s stock price. On average, the company delivered a positive earnings surprise of 12.09% in the trailing four quarters.

Ducommun sports a Zacks Rank #1 and has witnessed a 5.50% surge in its last day’s stock price. On average, the company delivered a negative earnings surprise of 44.58% in the trailing four quarters.

Leidos Holdings sports a Zacks Rank #2 (Buy) and has witnessed a 2.49% surge in its last day’s stock price. On average, the company delivered a negative earnings surprise 6.54% in the trailing four quarters. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>


In-Depth Zacks Research for the Tickers Above

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

LOCKHEED MARTIN (LMT) - free report >>

ENGILITY HLDGS (EGL) - free report >>