Lockheed Martin (NYSE:LMT) Is Increasing Its Dividend To $3.15

Lockheed Martin Corporation (NYSE:LMT) will increase its dividend on the 29th of December to $3.15, which is 5.0% higher than last year's payment from the same period of $3.00. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

View our latest analysis for Lockheed Martin

Lockheed Martin's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Lockheed Martin's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 5.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Lockheed Martin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $4.60 in 2013, and the most recent fiscal year payment was $12.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Lockheed Martin has seen EPS rising for the last five years, at 27% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Lockheed Martin's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Lockheed Martin that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.