Updated 3/11/25
Lockheed Martin is a powerhouse in the defense industry, supplying military technology, aerospace systems, and advanced weaponry to governments worldwide. As one of the largest defense contractors, it benefits from long-term government contracts that provide a steady revenue stream.
For income-focused investors, Lockheed Martin has been a reliable dividend payer for years. Even with the stock facing some price fluctuations recently, its dividend track record and financial strength make it worth a closer look. Below, we’ll break down the key metrics, growth prospects, financial health, valuation, and potential risks to see if LMT remains a solid dividend play.
Key Dividend Metrics
📢 Dividend Yield: 2.75%
💰 Annual Payout: $13.20 per share
📈 5-Year Dividend Growth Rate: Around 8%
🔁 Consecutive Years of Growth: 21
📊 Payout Ratio: 57.15%
📆 Next Payment Date: March 28, 2025
🔍 Ex-Dividend Date: March 3, 2025
Lockheed Martin’s dividend yield of 2.75% sits slightly above its five-year average, making it an attractive choice for those looking for steady income. With over two decades of consecutive dividend increases and a manageable payout ratio, the company has proven its commitment to rewarding shareholders.
Dividend Overview
For investors seeking a dependable source of income, Lockheed Martin has delivered consistently. The company has raised its dividend for 21 straight years, demonstrating a strong commitment to returning cash to shareholders.
A dividend yield of 2.75% may not be the highest in the market, but it is backed by strong free cash flow. Over the last year, Lockheed Martin generated $5.4 billion in free cash flow, giving it plenty of room to maintain and grow its dividend.
With defense spending remaining a priority for the U.S. government and international allies, Lockheed’s revenue streams are relatively stable. That kind of predictability is what makes this stock stand out in the dividend space.
Dividend Growth and Safety
One of the more impressive aspects of Lockheed Martin’s dividend policy is its growth. Over the past five years, the company has increased its payout at an annual rate of about 8%. That’s well above inflation, meaning investors who reinvest dividends are seeing their income grow in real terms.
On the safety side, the company maintains a payout ratio of 57.15%, which suggests that dividends are well covered by earnings. However, one concern is the company’s debt. Lockheed Martin carries a debt-to-equity ratio of 338.2%, which is on the higher end. While not necessarily a red flag, it’s something to watch, especially in a rising interest rate environment.
Overall, Lockheed Martin’s dividend remains solid, and there’s no immediate risk of cuts. But keeping an eye on debt and future cash flow will be important for long-term investors.
Chart Analysis
The chart for Lockheed Martin (LMT) tells a story of strong momentum in the middle of last year, followed by a sharp decline and a recent attempt at recovery. There are a few key technical indicators in play here that can give insight into the stock’s current positioning.
Moving Averages and Trend Direction
The 50-day moving average (orange line) surged higher last year, following LMT’s strong rally. However, as the stock topped out above 600, selling pressure took over, and the price started to roll over. The 50-day moving average has since crossed below the 200-day moving average (blue line), a bearish signal known as the death cross. This typically suggests that the broader trend has shifted downward, with sellers in control.
Now, the stock is attempting to push back toward the 50-day moving average. If it can reclaim this level and sustain momentum, it could signal a trend reversal. However, if the moving average acts as resistance, the downward trend may continue.
Volume and Buying Interest
Volume gives a sense of market conviction, and looking at the bars below the price chart, there has been a noticeable pickup in activity during certain selloffs. This suggests that there were heavy sellers willing to unload positions as LMT moved lower. More recently, green volume bars have increased, indicating buyers stepping in at lower prices.
A closer look shows that the volume on up days hasn’t been as strong as the selling volume during the decline. This means that while there is some buying interest, it may not be strong enough to completely shift the trend just yet.
Relative Strength Index (RSI) and Momentum
The RSI indicator at the bottom of the chart gives a measure of how overbought or oversold the stock is. When RSI falls below 30, it typically suggests that a stock is oversold and could be due for a bounce. Conversely, when it rises above 70, it indicates overbought conditions.
LMT’s RSI had been sitting in deep oversold territory for a while but has recently begun climbing back up. This aligns with the stock’s price recovery and could suggest that some buyers are returning to the market. However, RSI is still below 50, meaning the stock is not yet in strong bullish momentum.
Recent Candlestick Action
The last few candlesticks provide more clues about short-term price action. Recent candles have long lower wicks, meaning buyers have stepped in to push prices higher after intraday declines. This kind of behavior often signals support levels where demand is outweighing supply. However, if upcoming candles start to show upper wicks instead, it could suggest that sellers are still active and capping further upside.
With the stock nearing a critical level, how it behaves around moving averages and whether volume continues to rise will determine if this bounce is the start of a larger reversal or just a temporary rally within a broader downtrend.
Analyst Ratings
Lockheed Martin (LMT) has received a mix of upgrades and downgrades from analysts in recent months, reflecting different perspectives on the company’s future prospects.
📈 Upgrades
🔹 Wells Fargo & Company raised its price target from $468 to $476, maintaining an equal weight rating. The slight increase suggests a more optimistic stance on Lockheed’s valuation and potential upside.
🔹 RBC Capital upgraded the stock in August 2024, lifting its price target to $600. Analysts cited strong government defense spending and Lockheed’s continued dominance in military contracts as key factors behind the bullish outlook.
📉 Downgrades
🔻 Deutsche Bank downgraded Lockheed Martin from buy to hold, adjusting its price target from $611 to $523. Analysts pointed to rising competition, particularly China’s advancements in combat aircraft, which could challenge Lockheed’s F-35 program. Since the F-35 accounts for around 25% of the company’s sales, any shift in market demand could impact future revenue.
🔻 Barclays lowered its price target from $565 to $515, assigning an equal weight rating. The downgrade reflected a more cautious outlook on the stock’s near-term performance, citing potential headwinds in defense budgets and geopolitical uncertainty.
🎯 Consensus Price Target
The latest analyst consensus gives Lockheed Martin a moderate buy rating, with an average price target of $554.20. This suggests an expected upside of about 17.72% from current levels.
🔵 Highest target: $704
🔴 Lowest target: $377
The wide range of estimates highlights the uncertainty in forecasting Lockheed Martin’s future, with factors like defense spending, technological advancements, and global security tensions playing a major role in shaping investor sentiment.
Earnings Report Summary
Lockheed Martin’s latest earnings report gave investors a mix of solid revenue growth and some unexpected hurdles. The company wrapped up 2024 with full-year sales climbing to $71 billion, up from $67.6 billion the year before. However, net earnings took a hit, coming in at $5.3 billion, down from $6.9 billion in 2023.
Fourth Quarter Performance
The last quarter of the year wasn’t as strong as many had hoped. Revenue landed at $18.6 billion, slightly below the $18.9 billion from the same period in 2023. The real disappointment came in earnings, which dropped to $527 million, or $2.22 per share, a steep decline from $1.9 billion, or $7.58 per share, a year earlier.
A big part of the earnings decline came from unexpected losses on classified programs, which hit both the Aeronautics and Missiles and Fire Control segments. These setbacks cost the company around $1.7 billion, putting pressure on overall profitability.
Cash Flow and Financial Health
Cash flow also slowed in the final quarter. Lockheed Martin generated $1 billion in operating cash flow, but this was after a significant $990 million pension contribution. That’s quite a drop from the $2.4 billion in cash flow during the same period last year. Free cash flow also came down, finishing at $441 million compared to $1.7 billion a year earlier.
How Each Segment Performed
- Aeronautics saw sales dip, mostly due to lower production on the F-35 program and setbacks on classified projects. Operating profit fell for similar reasons.
- Missiles and Fire Control had higher sales from increased demand for tactical and strike missiles, but earnings were weighed down by the classified program losses.
- Rotary and Mission Systems held steady in terms of revenue, with some programs performing well enough to offset weaker areas. Operating profit improved thanks to better performance across integrated warfare systems.
- Space had a strong quarter, with increased sales and profits, largely due to higher demand for national security space programs and solid returns from joint ventures.
Looking Ahead to 2025
Despite the challenges in 2024, Lockheed Martin expects revenue to grow in 2025, forecasting sales between $73.8 billion and $74.8 billion. The company is targeting earnings per share in the range of $27.00 to $27.30, though there are still some concerns, including delays in upgrading the F-35 program and shifting global defense budgets.
While last year had its setbacks, Lockheed Martin is still positioned as one of the most important defense contractors in the world. The road ahead will likely come with challenges, but the company’s long-term outlook remains tied to global security needs and continued demand for its technology.
Financial Health and Stability
Lockheed Martin’s business is built on large-scale defense contracts, which provide revenue stability. Over the last 12 months, the company brought in $71 billion in revenue, though recent earnings growth has dipped.
Key Financial Highlights
- Total Cash: $2.48 billion
- Total Debt: $21.42 billion
- Debt-to-Equity Ratio: 338.2%
- Operating Cash Flow: $6.97 billion
Despite strong cash generation, Lockheed Martin’s balance sheet is heavily leveraged. The company’s current ratio of 1.12 indicates that it has just enough short-term assets to cover its liabilities.
That said, given its long-standing government contracts and history of managing its financial obligations, the debt levels are not an immediate concern. However, any significant increase in interest rates could make future borrowing more expensive, potentially impacting profitability.
Valuation and Stock Performance
Valuation Metrics
- Trailing Price-to-Earnings Ratio: 21.48
- Forward Price-to-Earnings Ratio: 17.61
- Price-to-Sales Ratio: 1.61
- Enterprise Value-to-EBITDA: 14.81
Lockheed Martin isn’t trading at a deep discount, but it also isn’t overvalued based on historical standards. With a forward P/E of 17.61, it sits in a reasonable range, especially for a company with reliable cash flow.
Stock Performance
- 52-Week High: $618.95
- 52-Week Low: $419.70
- Current Price: $469.84
- 50-Day Moving Average: $464.49
- 200-Day Moving Average: $512.96
The stock has seen some declines, currently trading below its 200-day moving average. This could indicate short-term weakness, but for dividend investors with a long-term horizon, these dips can present buying opportunities.
Risks and Considerations
Government Budget Constraints
Since most of Lockheed Martin’s revenue comes from government contracts, any changes in defense spending could impact earnings. While military budgets tend to be stable, political factors could influence contract renewals and future funding.
Debt Levels
With a debt-to-equity ratio well above 300%, Lockheed Martin is carrying a significant amount of debt. While manageable for now, higher interest rates could increase borrowing costs and put pressure on cash flow.
Supply Chain and Geopolitical Risks
The company operates in a global industry that is subject to supply chain disruptions, international conflicts, and political instability. Any major delays in production or rising material costs could affect margins.
Stock Volatility
Despite being a large, stable company, Lockheed Martin’s stock has seen fluctuations. Over the past year, it has traded between $419.70 and $618.95, showing that even a blue-chip stock in the defense sector isn’t immune to swings.
Final Thoughts
Lockheed Martin has built a strong reputation as a reliable dividend stock. With a yield of 2.75%, consistent dividend growth, and steady government-backed revenue, it remains an appealing option for income investors.
However, its high debt levels and recent stock price weakness are factors to consider. While dividends appear safe in the near term, keeping an eye on financial health and cash flow will be key for those holding Lockheed Martin as a long-term income investment.
Recent Comments