Lockheed Martin: A Solid Dividend Grower At The Right Price

Wide moat industrial stocks, such as defense contractor Lockheed Martin (LMT), often make excellent long-term dividend growth stocks.

In fact, Lockheed Martin is a dividend achiever with 15 straight years of consecutive dividend increases under its belt. Even better, the stock has managed to grow its payout at an impressive average annual rate of 10% over the past 30 years.

While Lockheed’s steady dividend increases have historically made it an attractive offering, past performance is not indicative of future results.

In addition to taking a look at the level of income growth investors can expect from Lockheed in the future, let’s also review the company’s competitive advantages and current valuation to see if Lockheed Martin could be a timely blue chip stock to consider for a diversified dividend growth portfolio.

Business Overview

Founded in 1909 in Bethesda, Maryland, Lockheed Martin is the world’s largest defense contractor and the biggest supplier of fighter aircraft. However, while the company is best known for the F-35 joint strike fighter, Lockheed Martin actually has four major divisions:

Aeronautics (39% of sales and 41% of operating profits year-to-date): designs, manufactures, and maintains combat and air mobility aircraft, including fighter jets (F-22, F-35, and F-16), military transport planes, and unmanned air vehicles.

Missiles and Fire Control (14% of sales and 21% of operating profits): provides air and missile defense systems, tactical missiles and air-to-ground precision strike weapon systems.

Rotary and Mission Systems (28% of sales and 17% of operating profits): builds and maintains military and commercial helicopters. Also designs ship and submarine mission and combat systems, including mission systems and sensors for rotary and fixed-wing aircraft, sea and land-based missile defense systems as well as radar systems, the Littoral combat ship, simulation and training services, and unmanned systems and technologies. This division also offers government cybersecurity services and specializes in military communication solutions.

Space Systems (20% of sales and 21% of operating profits): designs and builds satellites, strategic and defensive missile systems, and space transportation systems. This division is also where Lockheed designs its classified systems and services in support of national security.

Overall, Lockheed Martin generates 60% of its sales from the U.S. Department of Defense, 20% from U.S. government agencies, and 20% from international militaries.

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