Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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
Headquartered in Bethesda, Lockheed Martin (LMT) is an Aerospace stock that has seen a price change of 35.01% so far this year. The aerospace and defense company is currently shelling out a dividend of $2.2 per share, with a dividend yield of 2.49%. This compares to the Aerospace - Defense industry's yield of 1.02% and the S&P 500's yield of 1.94%.
In terms of dividend growth, the company's current annualized dividend of $8.80 is up 7.3% from last year. In the past five-year period, Lockheed Martin has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.60%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Lockheed's current payout ratio is 44%, meaning 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 2019 is $20.50 per share, with earnings expected to increase 16.54% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
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