defense dividend stocks

3 Aerospace and Defense Dividend Stocks in Turbulent Markets

The defense industry contains several appealing stocks for dividend growth investors. Constant geopolitical concerns and rising defense budgets worldwide provide a strong backdrop for the most prominent defense companies.

Due to the persistent need for global defense, the principal defense companies have sustainable regular dividends, even during recessions. In turn, investors have received strong returns from defense stocks and steady dividend growth each year.

This article will discuss 3 of the top defense stocks for dividend growth investors.


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3 Aerospace and Defense Dividend Stocks

Lockheed Martin (LMT)

Lockheed Martin Corporation is the world’s largest defense company by revenue. About 60% of the company’s revenues come from the United States Department of Defense, with other U.S. government agencies (10%) and international customers (30%) making up the rest.

The firm has four business segments: Aeronautics (~40% sales) – which produces military aircraft like the F-35, F-22, F-16, and C-130; Rotary and Mission Systems (~26% sales) – which houses combat ships, naval electronics, and helicopters; Missiles and Fire Control (~16% sales) – which creates missile defense systems; and Space Systems (~17% sales) – which produces satellites. 

Lockheed Martin reported results for Q4 2023 on January 23rd, 2024. For the quarter, net sales decreased to $18,874M from $18,991M, and diluted GAAP earnings per share rose to $7.58 from $7.40 on a year-over-year basis because of lower share count and mark-to-market accounting offset by profit margin and interest expense. On an adjusted basis, diluted EPS rose to $7.90 from $7.79 per share. 

Lockheed Martin’s backlog is at a record of $160.6B, with increases in all segments. Lockheed Martin guided for ~$68.5B – $70.0B in sales and ~$25.65 – $26.35 in diluted earnings per share in 2024.

Lockheed Martin’s earnings per share growth has come because of the F-35, tactical and strike missiles, satellite and missile defense programs, the Sikorsky acquisition, and lower share count. The F-35 is one of the world’s most advanced stealth military aircraft and will likely drive growth in the long term. The Pentagon plans to buy 2,456 F-35s, not including sales to allies. It will become the largest defense program in history. 

Our earnings growth estimate is 6% out to 2029. We now expect the dividend to grow ~6% on average annually and the payout ratio to range from 45% to 55%. According to Portfolio Insight*, Lockheed Martin is a Dividend Contender with 22 years of increases.

Portfolio Insight - Dividend Growth LMT
Source: Portfolio Insight*

Related Articles About Lockheed Martin on Dividend Power

RTX Corporation (RTX)

RTX Corporation was formed from the merger of two previously independent industrial giants, Raytheon and United Technologies. The combined company subsequently spun off Carrier (CARR) and Otis (OTIS), which now trade independently. Raytheon Technologies is one of the largest global aerospace and defense companies, with $68 billion in 2023 sales. It is our second aerospace and defense dividend stock.

The company has four operating segments: Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. 

On January 23rd, Raytheon Technologies reported its fourth quarter and full-year results. Revenue grew 10% to $19.9 billion for the quarter, topping estimates by $230 million. Adjusting for the impact of the Pratt engine defect, sales still increased 10% to $19.8 billion. 

Organic sales were 10% higher for the period. For the quarter, results were up 12%, 14%, and 3% in the Collins Aerospace, Pratt & Whitney, and Raytheon segments. Raytheon Technologies’ backlog at the end of the quarter was a record $196 billion, compared to $190 billion in the third quarter of 2023, of which $118 billion was from commercial aerospace and $78 billion was from defense. The company’s full-year book-to-bill ratio was 1.24.

Adjusted earnings-per-share of $1.29, compared to $1.27 in the prior year, were $0.04 more than expected. Revenue grew 3% to $68.9 billion, while adjusted sales were up 10.9% to $74.3 billion. Adjusted EPS of $5.06 compared to $4.78 in 2022. 

The company has now raised its dividend for 29 years. RTX stock yields 2.3% at the current share price.

Portfolio Insight - Dividend Trend Analysis RTX
Source: Portfolio Insight*

Related Articles About Raytheon Technologies on Dividend Power


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General Dynamics (GD)

General Dynamics is an aerospace and defense company that operates in four business segments: Aerospace, Combat Systems, Marine Systems, and Technologies. Based on revenue, General Dynamics is the fourth-largest defense company.

General Dynamics is an entrenched military prime contractor. It has ground and marine platforms that serve as the backbone for the U.S. Army, U.S. Navy, and militaries worldwide. These platforms have decades-long life cycles, and General Dynamics has the expertise to maintain and modernize them. These characteristics comprise a significant competitive advantage and result in resilience to recessions.

General Dynamics reported Q4 2023 and full-year results on January 24th, 2024. For the quarter, companywide revenue rose 7.5%, and diluted earnings per share increased 1.7% to $3.63. Aerospace revenue rose 12.0% in the prior year. The total backlog rose to $20,454M after six quarters of increases. Gulfstream demand is strong, with a book-to-bill ratio of 1.15X. 

General Dynamics’ Aircraft Service revenue rose 8%. Revenue for Marine Systems increased 14.8% to $3,408M from $2,969M on the strength of the Columbia and Virginia-class submarine programs. The total segment backlog is at $45,896M. Combat Systems revenue climbed 8.5% to $2,364M from $2,179M. The total backlog is $14,537M. 

Revenue rose 7.3% for the year to $42.3B, but EPS fell 1.2% to $12.02 on higher costs and lower margins. The companywide backlog is at $93.6B, of which ~$72.5B is funded and ~$21.2B is unfunded. The book-to-bill ratio was 0.8X. 

The firm has increased its dividend for 32 years. General Dynamics is a Dividend Aristocrat. The stock currently yields 2%. The latest dividend increase announcement was in March 2024.

Portfolio Insight - Dividend Yield History GD
Source: Portfolio Insight*

Disclosure: Members of the Sure Dividend team are long the stocks discussed in this article.

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Bob Ciura
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Bob Ciura is President of Content at Sure Dividend. Bob has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. Bob received a bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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