Lockheed Martin's (NYSE:LMT) Dividend Will Be Increased To $3.30

Lockheed Martin Corporation (NYSE:LMT) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of December to $3.30. This makes the dividend yield 2.5%, which is above the industry average.

See our latest analysis for Lockheed Martin

Lockheed Martin's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Lockheed Martin's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 11.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $5.32 total annually to $13.20. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Lockheed Martin's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Lockheed Martin has seen EPS rising for the last five years, at 5.9% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Lockheed Martin Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. 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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