Lockheed Martin – A Stock With An Annual Dividend Of $10.40

I have been working as a financial analyst for 13 years now.

I have used the top-down and bottom-up approach to identify quality stocks in the U.S. markets.

I though I can share some good investment ideas in this group.

This is just my view on stocks. Investors should always do their homework before considering any exposure to the stocks I discuss.

I believe that Lockheed Martin Corporation (NYSE:LMT) is a quality dividend stock for investors. The stock currently trades at $372 and has a current annual dividend of $10.4. This implies an attractive dividend yield of 2.7%.

I further believe that the company’s dividends will sustain and potentially increase in the coming years. The reasons are as follows –

First, the company is in the defense sector, which is an evergreen sector. As geo-political tensions remain high globally, the company stands to benefit.

Second, the company currently has an order backlog of $150 billion. This provides clear revenue and cash flow visibility. With strong cash flows, dividends will also sustain and increase.

Third, for the first nine months of 2020, the company generated cash flow from operations of $6.3 billion. This implies an annualized cash flow of $8 to $10 billion. Even with aggressive investments, the company will have enough free cash flows to reward investors.

Fourth, the company’s growth is not limited to orders from the U.S. government. There is an increasing flow of orders from U.S. allies. This positions the company for sustained growth in the order backlog. The most recent quarter was the ninth consecutive quarter of record order backlog.

Fifth, besides a health dividend and a robust growth outlook, the stock has a low beta of 0.94. LMT stock is therefore good for creating a defensive portfolio. In particular, when broad market valuations are stretched.

Company's Sales Outlook for 2020