Last update on 2024-06-27

Lockheed Martin (LMT) - Dividend Analysis (Final Score: 8/8)

Comprehensive dividend analysis of Lockheed Martin (LMT) with a perfect 8/8 score, showcasing stability, performance, and long-term growth in dividend payouts.

Short Analysis - Dividend Score: 8

We're running Lockheed Martin (LMT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Lockheed Martin (LMT) using an 8-criteria scoring system gives it a perfect score of 8. The criteria look at several aspects of the company's dividend policy to evaluate its performance and stability. Lockheed Martin has a dividend yield that is substantially higher than the industry average, signifying its strong commitment to returning value to shareholders. Additionally, it has displayed a consistent and high dividend growth rate, well-managed payout ratio, robust earnings coverage, and adequate cash flow. The company has also maintained stable dividends over the past 20 years and has a remarkable track record of paying dividends for over 25 years. Moreover, its reliable stock repurchase activities further solidify its financial health and shareholder-friendly approach.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Lockheed Martin (LMT) appears to be a strong option for investors seeking reliable and growing dividends. The company has consistently demonstrated its ability to pay and grow its dividends, supported by robust financial metrics and prudent management. The high dividend yield, secure payout ratios, and consistent dividend payments highlight its stability and long-term reliability. Additionally, its active stock repurchase program enhances shareholder value. Therefore, it would be worthwhile for investors to consider Lockheed Martin as a valuable addition to their investment portfolio.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield indicates how much a company pays out in dividends each year relative to its stock price. A higher yield can attract income-focused investors, whereas a lower yield could be less appealing. Comparing a company's yield to its industry average can offer insights into its dividend performance.

Lockheed Martin (LMT) boasts a current dividend yield of 2.6807%, substantially higher than the industry average of 1.16%. Over the past 20 years, Lockheed Martin's dividend yield has experienced fluctuations, peaking notably in 2012 at 4.4967% and reaching some relative lows but remaining consistently above the industry norm. The past few years have reflected stabilization in the dividend yield, ranging from 2.3114% in 2019 to the present 2.6807% in 2023. This superior yield compared to the industry reflects Lockheed Martin's strong dividend payout commitment, making it an attractive option for dividend-seeking investors. The consistent dividend payments and the growth of dividends per share over 20 years also bolster confidence in its long-term dividend policy. Despite varying stock prices, the ability to maintain and grow dividends underscores a robust financial health and prudent management decisions.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for Lockheed Martin (LMT) and why it is important to consider

The criterion examines the Dividend Growth Rate being higher than 5% in the last 20 years. Having a Dividend Growth Rate above this threshold indicates that the company not only sustains but also incrementally enhances its shareholder returns over time, signifying strong cash flows and promising future prospects. This factor plays a significant role for long-term investors looking for both income and appreciation in their investments.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for Lockheed Martin (LMT) and why it is important to consider

The payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. For a company like Lockheed Martin (LMT), maintaining a payout ratio below 65% over a 20-year period is crucial as it indicates financial stability and sustainable dividend payments. A lower payout ratio suggests that the company retains a substantial portion of earnings to reinvest in its operations, ensuring future growth and the potential for continued dividend payments.

Dividends Well Covered by Earnings?

Covered by Earnings

Lockheed Martin has consistently demonstrated a robust capacity to cover its dividends from its earnings. Beginning with a modest Earnings per Share (EPS) of $2.34 in 2003, rising to an impressive $27.65 by 2023, the company's EPS has shown a substantial upward trend. This consistent growth suggests strong financial health and profitability. The Dividend per Share (DPS) has similarly increased, from $0.57 in 2003 to $12.15 in 2023. Analyzing the coverage ratio of dividends by earnings, which fluctuates between around 0.21 to approximately 0.61, with only one outlier year where it surpassed 1 due to special factors, it averages to around 0.43. This indicates that Lockheed Martin has steadily maintained a prudent balance between retaining earnings for growth and distributing dividends to its shareholders, thus showcasing a good trend.

Dividends Well Covered by Cash Flow?

Assessing whether dividends are covered by cash flow involves comparing a company's free cash flow against its dividend payouts. This measure determines if the company generates sufficient cash to sustainably fund its dividend distributions.

Lockheed Martin's trend in dividends covered by cash flow shows an average of around 0.43 over two decades. However, this includes peaks such as in 2012 at 2.18 and a notable high in 2019 at 1.26, indicating substantial free cash flow relative to dividend payouts in these years. Consistently covering dividends by free cash flow is crucial to avoid liquidity issues, so while these sporadic highs are positive, the lower values in other years suggest occasional tight dividend coverage, with values below 0.5 highlighting potential stress in maintaining dividend distributions.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years. Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Given the data, there was a drop in dividend per share from $6.82 in 2014 to $6.15 in 2015, which is a decrease of around 9.8%, so no year observed a drop more than 20%, conforming to one criterion for stability and reliability in company returns.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years refers to a company’s ability to consistently pay out dividends to its shareholders over a long period, reflecting financial stability, reliability, and shareholder value.

Based on the provided data, Lockheed Martin (LMT) has consistently paid dividends for the past 25 years. The trend in dividend per share shows significant growth from $0.82 in 1998 to $12.15 in 2023. This increase in dividends reflects strong cash flow management, profitability, and a commitment to returning value to shareholders. The consistent and growing dividends are a positive sign and indicate strong financial health and investor confidence in the company. Therefore, the trend in dividends paid by Lockheed Martin is very good and supports a long-term investment perspective.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Lockheed Martin (LMT) and why it is important to consider

The evaluation of reliable stock repurchases over the past 20 years gives us insights into Lockheed Martin's capital management strategy. From 2003 to 2023, the trend in the number of shares outstanding has steadily declined from 450 million to 250.3 million, indicating consistent share repurchase activities. It's crucial to recognize this trend as it showcases Lockheed Martin's commitment to returning value to shareholders, often indicative of strong cash flows and a solid financial position. The average annual repurchase rate over this period stands at -2.8701%, illustrating sustained buybacks annually. Importantly, the company consistently executed repurchases every year, reflecting a dependable strategy. This trend is positively received as it benefits existing shareholders by improving earnings per share (EPS) and demonstrating the company's confidence in its own stock. Thus, the systematic reduction of outstanding shares is commendable and signals effective capital allocation by Lockheed Martin's management.