Here's What We Like About Lockheed Martin's (NYSE:LMT) Upcoming Dividend

Readers hoping to buy Lockheed Martin Corporation (NYSE:LMT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Lockheed Martin's shares before the 3rd of September to receive the dividend, which will be paid on the 27th of September.

The company's next dividend payment will be US$3.15 per share, and in the last 12 months, the company paid a total of US$12.60 per share. Last year's total dividend payments show that Lockheed Martin has a trailing yield of 2.2% on the current share price of US$566.85. If you buy this business for its dividend, you should have an idea of whether Lockheed Martin's dividend is reliable and sustainable. As a result, readers should always check whether Lockheed Martin has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Lockheed Martin

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Lockheed Martin paying out a modest 45% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 44% of its free cash flow in the past year.

It's positive to see that Lockheed Martin's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Lockheed Martin earnings per share are up 9.8% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Lockheed Martin has lifted its dividend by approximately 9.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Lockheed Martin? Earnings per share have been growing moderately, and Lockheed Martin is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Lockheed Martin is being conservative with its dividend payouts and could still perform reasonably over the long run. Lockheed Martin looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Lockheed Martin looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Lockheed Martin that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.