“There will be wars and rumors of wars.” And that is why there will always be demand for defense companies that supply the weapons of war.
Lockheed Martin Corp (LMT) is one of the largest defense companies there is. Their most well-known product is the F-35 fighter plane. Lockheed Martin is a security and aerospace company engaged in the research, design, manufacture, and upkeep of technological systems worldwide. They have four segments, which include Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. They provide combat airplanes, drones, missile defense systems, military and commercial helicopters, surface ships, cyber solutions, satellites, and integrate space and ground-based systems to help gather, analyze, and distribute intelligence data. Basically, anything you need for modern warfare, Lockheed Martin can get for you.
LMT stock has had a good year. It was at $357.55 on January 6, 2021 and hit $498.95 on December 2, 2022. It currently sits at $473.24 as of this writing. Yahoo Finance shows a price target of $482.18, indicating most of the upside has been reached. Morningstar shows a fair value at $437.00 for LMT. Lockheed Martin pays an annual dividend of $12.00 having raised it the last quarterly payment. This gives a dividend yield of 2.53%, in line with its 5-year average, while paying out less than half of their earnings most years. LMT has grown their dividend at a 10.63% rate over the last 10 years. There is no indication the dividend will not keep growing.
Over the years, Lockheed Martin receives the lion’s share of the annual U.S. defense budget. As recently as January 3, 2023, it was announced Lockheed was awarded a $7.84 BILLION contract for new F-35 planes and support equipment. There also seems to be weekly contracts awarded for service and modifications to the equipment they have already sold. The 3–5-year EPS growth forecast is 7.85%. This is not as fast as some of its peers, but it is a good growth rate for the size of the company. Some of Lockheed Martin’s peers and competitors include Boeing, Raytheon, Northrop Grumman, and General Dynamics. LMT has a market cap of $125 Billion, larger than all of these except Raytheon who has a market cap of $148 Billion.
Lockheed Martin is probably at the high end of this current share price cycle. They are a good company for a long-term investor to buy and just put away for years. I think the company will continue to grow, but you may be able to find a better entry point short-term, especially with the volatility that the stock market in general is experiencing. Most rating companies rate LMT a buy or a hold.
As always, do your own due diligence before buying. Full disclosure, I own shares of Lockheed Martin Corp. Sources include Morningstar, Schwab, and Yahoo Finance.
(Intentional Investing is a weekly column written by Kyle Smith from Floyd County, TX, based upon his investment knowledge and does not represent the views or opinions of the Floyd County Record. You can reach Mr. Smith via email at insureddividends@gmail.com)
