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Wednesday, April 13, 2016

Recent Transfer: Lockheed Martin Corporation

Founded in 1909 and headquartered in Bethesda, Maryland, Lockheed Martin Corporation (NYSE:LMT) is a global security and aerospace company engaged in the research, design, development, manufacture and integration of advanced technology systems. The company also provides management, engineering, technical, scientific, logistics, and information services.

I'm busy consolidating several portfolios containing dividend paying stocks. This transfer adds a new position to DivGro, which now contains a total of 60 holdings. This article explains why I like LMT as a dividend growth stock.

To recap, I've completed the transfer of stocks from my Scottrade portfolio and from my traditional IRA. Last week, I wrote about the first transfer from my Roth IRA and, today, I'm transferring the second stock. Here's a summary of the IRA and Roth IRA stocks transferred so far:
LMT is a Dividend Contender with a 13-year streak of dividend increases. LMT pays quarterly dividends of $1.65 per share in the months of March, June, September and December. At the current share price of $224.71, the stock yields 2.94%.

As mentioned above, LMT is a new holding. Below is a chart showing my buy prices.

The 2 buys I'm transferring today are connected with red dashed lines. Average cost basis is $180.82, while yield on cost (YoC) averages to 3.65%. So far, I'm quite happy with my investment in LMT.

2014-01-03  Bought: 7 shares of LMT at $147.56 per share:$1,032.91
2014-03-28Dividend on 7 shares at $1.33 per share:$9.31
2014-06-27Dividend on 7 shares at $1.33 per share:$9.31
2014-09-26Dividend on 7 shares at $1.33 per share:$9.31
2014-12-26Dividend on 7 shares at $1.50 per share:$10.50
2015-03-27Dividend on 7 shares at $1.50 per share:$10.50
2015-06-26Dividend on 7 shares at $1.50 per share:$10.50
2015-09-25Dividend on 7 shares at $1.50 per share:$10.50
2015-12-24Dividend on 7 shares at $1.65 per share:$11.55
2016-02-19Bought: 7 shares of LMT at $214.09 per share:$1,498.63
2016-03-24Dividend on 14 shares at $1.65 per share:$23.10
 Total Capital Invested $2,531.54

Total Dividends Received:$104.58

With this transfer, DivGro's projected annual dividend income (PADI) increases by $92.40 and I'm adding $104.58 in past dividends to DivGro's total dividend income.

Ratings and Fair Value Estimates for LMT

Following is a table containing updated ratings of LMT from various sources:
 Morningstar Ratings (**---) Credit Rating: A- 
 Dividend.com's DARS Rating  3.5/5 (Recommended)
 TheStreet Ratings Rating  Buy [A+]
 The Motley Fool's CAPS Rating  (-----)
 Thomson Reuters StockReport+ (7/10) Neutral 
 S&P Capital IQ Stock Report Sell (**---) Quality Ranking: A+ 
 Zacks Rank and VGM Style Score 3-Hold (VGM:D)
 Tipranks Analysts Consensus Rating  Hold
  †combined Value/Growth/Momentum score

Morningstar's fair value estimate of LMT is $193.00, whereas S&P Capital IQ calculates a fair value of $223.40. According to Tipranks, based on 3 ranked analysts offering 12-month price targets for LMT, the average price target is $233.00. Finally, using a Comparative Analysis based on EBITDA, courtesy of finbox.io, LMT has a fair value estimate of $207.46 (see below).

The average of these valuations is $214.21, which means LMT is trading at a premium of about 5% to fair value.

Why LMT?

Here are some reasons why I like LMT:
  1. The stock yields nearly 3% and dividends are growing at an impressive rate. The most recent dividend increase was 10%. The company has an aggressive share repurchase program. 
  2. LMT is the largest defense contractor in the United States, with steady and solid cash flow generating contracts in place with the Department of Defense and government cyber security programs. Additionally, the company generates about 20% of total sales from international markets.
  3. Morningstar assigns LMT a wide economic moat, highlighting the company's decade-long experience with government rules and regulations, expertise stemming from research and development and the delivery of proven and mission-ready products, and undisputed leadership in fifth-generation fighter aircraft.
  4. The company's acquisition of Sikorsky in 2015 is improving LMT's financials, already adding $16 billion in backlog and increasing fiscal 2015 backlog to $100 billion. 
  5. Market analysts ratings of LMT are quite positive, with 7 strong buys, 3 buys, 7 neutrals, 1 sell, and no strong sells.
Do you own shares of LMT? What do you think of this stock as a dividend growth stock? The stock seems a little expensive right now. Would you buy shares at the current price? Please share your ideas in the comments section below.


  1. with wars are everywhere, defense stocks have done very well with room to run.

    Best of luck with future stock pick!

    1. Hi Vivianne -- thanks for reading and commenting!

      Its with mixed feelings that I invest in stocks like LMT, RTN and NOC, and also MO and PM. I wonder how other readers feel about this?

      Take care


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