Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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 -1.97% so far this year. The aerospace and defense company is currently shelling out a dividend of $2.4 per share, with a dividend yield of 2.51%. This compares to the Aerospace - Defense industry's yield of 0.12% and the S&P 500's yield of 1.83%.
In terms of 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 9.97%. 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 41%, which means it paid out 41% 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 $24.12 per share, representing a year-over-year earnings growth rate of 9.89%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, LMT is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
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