Updated 3/11/25
Leidos Holdings, Inc. (LDOS) is a major player in the defense, technology, and engineering sectors, primarily serving government agencies and commercial clients. With a market cap of around $18 billion, the company has built a strong reputation for delivering mission-critical solutions.
For dividend investors, Leidos isn’t necessarily a high-yield stock, but it offers consistency, sustainability, and financial discipline—a great combination for those who prioritize steady income over risky, high-yield plays. The company generates reliable cash flow and has a history of measured dividend payments, making it an attractive option for long-term investors.
Let’s dive into what makes Leidos a worthwhile consideration for income-focused investors.
Key Dividend Metrics
📈 Dividend Yield: 1.16% (Forward)
💰 Annual Dividend: $1.60 per share
📅 Ex-Dividend Date: March 14, 2025
🛡 Payout Ratio: 16.7% (Very conservative)
📊 5-Year Average Yield: 1.35%
📈 Dividend Growth: Steady but not aggressive
🏆 Dividend Safety: Well-supported by cash flows
Dividend Overview
Leidos doesn’t offer the biggest dividend out there, but what it lacks in yield, it makes up for in reliability. The current forward dividend yield of 1.16% is slightly below its five-year average, meaning it’s been fairly consistent over time.
What stands out is the low payout ratio of just 16.7%, which means the company is only using a small fraction of its earnings to pay dividends. This allows for financial flexibility—Leidos can reinvest in its business, buy back shares, or increase dividends when the timing is right.
This stock is a good fit for investors looking for steady income with low risk, rather than those chasing the highest yield.
Dividend Growth and Safety
One of the key factors dividend investors should consider is how safe and sustainable a company’s dividend is. Leidos performs well on this front.
- The payout ratio is extremely low, giving the company room to continue paying dividends even during economic downturns.
- The company generates strong free cash flow, with over $1 billion in levered free cash flow over the last year. That’s plenty of liquidity to cover its dividend payments.
- While Leidos doesn’t raise its dividend aggressively, it has a track record of maintaining and modestly growing its payouts.
Since Leidos primarily serves government agencies, its revenue is relatively stable, which supports dividend consistency. Even in uncertain market conditions, the company’s contracts provide a predictable stream of income.
Chart Analysis
Trend and Moving Averages
The price action for Leidos Holdings (LDOS) over the past year shows a clear cycle of strong growth, a sharp spike, and then a prolonged correction. Initially, the stock had a steady uptrend, with the 50-day moving average (orange line) acting as support for much of the move. However, after a significant breakout that took the price above 200, momentum faded quickly, and a steep decline followed.
Now, the stock is trading below both the 50-day and 200-day moving averages, which is typically a bearish sign. The 50-day average is sloping downward, having crossed below the 200-day moving average, a technical event known as a death cross. This suggests that the recent trend remains weak, and it may take some time before the stock regains strong upward momentum.
Volume and Market Activity
Volume tells an interesting story here. There was a noticeable surge in trading volume at the peak, which likely indicates profit-taking or institutional selling. The heavy red volume bars that followed show that selling pressure was strong during the decline. More recently, volume appears to have stabilized, but it hasn’t shown the kind of strong accumulation that would confirm a new uptrend.
Without a clear volume surge supporting recent price gains, this recovery could face resistance. The stock is now at a critical level, sitting just around the 50-day moving average, which may act as resistance if buying momentum does not increase.
Relative Strength Index (RSI)
The RSI, shown in the lower portion of the chart, dipped into oversold territory during the decline but has started to recover. This suggests that some buyers have stepped in at lower levels. However, the RSI is still in a relatively neutral range, meaning there is room for the stock to move either way without being considered overbought or oversold.
A continued push higher in RSI could indicate increasing strength in the current rebound, while a rejection at current levels would suggest more downside pressure remains.
Recent Price Action and Key Levels
The last five candles show a mix of small-bodied candlesticks, indicating a bit of hesitation in the market. The stock attempted to push higher but faced selling pressure around the 137-140 level. Wicks on both ends of the candles suggest indecision, with buyers and sellers in a bit of a standoff.
If the price can break and hold above the 50-day moving average, it would be an early sign that momentum is shifting. However, if it gets rejected at this level and turns lower again, it could signal another leg down. The previous lows around 125 would then become a key area to watch for potential support.
Analyst Ratings
Leidos Holdings, Inc. (LDOS) has recently received a mix of upgrades and downgrades from analysts, reflecting both optimism and caution about the company’s outlook.
Upgrades
📈 Wells Fargo – On February 26, 2025, Wells Fargo maintained its Overweight rating on Leidos while adjusting the price target slightly from $197 to $191. The firm continues to see Leidos as a strong performer but acknowledged near-term challenges that led to the minor reduction in its target price.
🚀 Truist Securities – On February 12, 2025, Truist Securities reaffirmed its Buy rating on the stock but lowered its price target from $185 to $165. This suggests that while analysts at Truist still view Leidos favorably, they expect some volatility ahead and a slower pace of growth than previously estimated.
Downgrades
⚠️ William Blair – On February 21, 2025, William Blair downgraded Leidos from Outperform to Market Perform, signaling that they now expect the stock to perform in line with the broader market rather than delivering excess returns. The shift in stance reflects concerns over near-term earnings growth and potential contract risks in the defense sector.
🔻 TD Cowen – On January 8, 2025, TD Cowen moved its rating from Buy to Hold, also cutting the price target from $200 to $165. Analysts pointed to macroeconomic headwinds and budget uncertainties that could impact government contract spending, leading them to take a more neutral stance.
📊 Consensus Price Target: As of the latest analyst updates, the average 12-month price target for Leidos stands at $175.87, indicating potential upside from current levels. However, the mixed ratings show that analysts are divided on how quickly the stock can recover and whether it will outperform the broader market in the near term.
The combination of upgrades and downgrades suggests that while Leidos has strong fundamentals, factors like government contract cycles and broader market conditions are leading to a more cautious tone from some analysts.
Earning Report Summary
Leidos Holdings wrapped up its latest quarter on a strong note, delivering solid financial results that show the company is still firing on all cylinders. With steady revenue growth, improved profitability, and a strong backlog of contracts, there’s plenty for investors to digest.
Fourth Quarter Performance
The company reported $4.37 billion in revenue, a solid 10% increase from the same time last year. That kind of growth isn’t just luck—it’s largely due to higher demand for defense-related products and services, as global military spending remains elevated.
Earnings per share came in at $2.37, which was slightly ahead of what analysts were expecting. Profitability also improved thanks to better cost control and increased efficiency across the board. The company has been making smart moves in managing expenses while scaling its operations.
Full-Year Results
For the entire fiscal year, Leidos pulled in $16.66 billion in total revenue, up nearly 8% year-over-year. That’s an impressive climb and speaks to the company’s strong market position.
Profit margins also improved, with adjusted EBITDA rising to $2.15 billion, giving the company a 12.9% EBITDA margin. Strong cash flow is another highlight, with Leidos generating $1.39 billion in net cash from operations, ensuring plenty of financial flexibility.
Key Wins and Contract Momentum
One of the biggest reasons for Leidos’ success is its ability to win major contracts. Over the past year, the company locked in some high-profile deals, including a $2.6 billion TSA logistics software contract and a $4.1 billion agreement for the IFPC Enduring Shield Air Defense System. These wins add to an already impressive backlog, setting the stage for steady revenue streams in the future.
A key metric to watch is the book-to-bill ratio, which came in at 1.7 for the fourth quarter and 1.4 for the full year. This basically means that Leidos is winning more contracts than it’s delivering on, a strong indicator of future growth.
What’s Next for 2025?
Looking ahead, Leidos expects revenue to land somewhere between $16.9 billion and $17.3 billion, signaling continued growth momentum. The company also expects earnings per share to range from $10.35 to $10.75, staying in line with analyst expectations.
With a strong pipeline of contracts, steady financials, and improving margins, Leidos looks set to keep delivering in the coming year. The focus will now be on execution and ensuring these major deals translate into sustained revenue and profit growth.
Financial Health and Stability
A strong dividend comes from a strong business, and Leidos has solid financials backing its payouts.
- Revenue is growing, with a 9.7% year-over-year increase in the last quarter and $16.66 billion in revenue over the past year.
- Profitability is solid, with a 7.53% profit margin and an operating margin of 9.48%.
- Return on Equity (ROE) is high at 28.7%, showing strong shareholder returns.
- Debt levels are worth watching, with a debt-to-equity ratio of 121.39%. While not alarming, it’s something to keep in mind.
The company’s cash flow is strong enough to support its dividend, and its current ratio of 1.21 suggests it has enough liquidity to cover short-term obligations.
Valuation and Stock Performance
At its current price of $134.58, Leidos is down about 2% on the day but remains a fairly valued stock based on key metrics.
- The forward price-to-earnings (P/E) ratio is 12.82, which suggests the stock is reasonably priced compared to earnings expectations.
- The price-to-book ratio is 4.08, which is a bit on the higher side, but nothing extreme.
- The enterprise value to EBITDA ratio is 10.54, meaning it’s trading at a fair multiple relative to its earnings before interest, taxes, depreciation, and amortization.
While the stock has pulled back from its 52-week high of $202.90, it remains well above its 52-week low of $123.23. This suggests a level of stability, even in uncertain market conditions.
For investors looking for a defensive stock with steady dividends, Leidos offers a fair valuation and a solid track record.
Risks and Considerations
No stock is without risk, and while Leidos is a strong company, there are a few things investors should keep in mind.
⚠️ Debt Load – The company carries a high debt-to-equity ratio of 121.39%. While it has strong cash flows, a rising interest rate environment could increase borrowing costs and impact future financial flexibility.
⚠️ Government Contract Dependence – A significant portion of Leidos’ revenue comes from government contracts, which means budget cuts or shifts in policy could affect earnings.
⚠️ Dividend Yield is Modest – For those looking for high dividend yields, this stock might not be the best fit. While the dividend is safe and stable, it won’t provide substantial passive income.
Despite these risks, Leidos remains a financially strong company with a secure dividend payout.
Final Thoughts
Leidos Holdings, Inc. isn’t a high-yield dividend stock, but it offers something equally valuable—stability and sustainability. Investors looking for a company that generates steady cash flow, maintains a safe dividend payout, and operates in a defensive industry may find this stock appealing.
With a low payout ratio, strong free cash flow, and consistent government revenue, Leidos is well-positioned to maintain its dividend payments for the long term. While it’s not a stock for those seeking rapid dividend growth, it’s a reliable choice for those prioritizing dividend safety over high yields.
For long-term income investors, Leidos can serve as a defensive anchor in a diversified dividend portfolio.
Recent Comments