Lockheed Martin (LMT) is a Top Dividend Stock Right Now: Should You Buy?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Lockheed Martin in Focus

Lockheed Martin (LMT) is headquartered in Bethesda, and is in the Aerospace sector. The stock has seen a price change of -4.09% since the start of the year. The aerospace and defense company is paying out a dividend of $2.4 per share at the moment, with a dividend yield of 2.57% compared to the Aerospace - Defense industry's yield of 0.83% and the S&P 500's yield of 2.28%.

Looking at dividend growth, the company's current annualized dividend of $9.60 is up 6.7% from last year. Over the last 5 years, Lockheed Martin has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.18%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Lockheed's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, LMT expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $24.07 per share, representing a year-over-year earnings growth rate of 9.66%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that LMT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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