Stock Analysis

Lockheed Martin (NYSE:LMT) Has Announced That It Will Be Increasing Its Dividend To $3.00

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NYSE:LMT
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Lockheed Martin Corporation (NYSE:LMT) will increase its dividend from last year's comparable payment on the 30th of December to $3.00. This makes the dividend yield 2.5%, which is above the industry average.

Our analysis indicates that LMT is potentially undervalued!

Lockheed Martin's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Lockheed Martin's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 30.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

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NYSE:LMT Historic Dividend November 29th 2022

Lockheed Martin Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $4.00, compared to the most recent full-year payment of $12.00. This means that it has been growing its distributions at 12% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Lockheed Martin has impressed us by growing EPS at 12% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Lockheed Martin's Dividend

Overall, a dividend increase is always good, and we think that Lockheed Martin is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Lockheed Martin that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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