Lockheed Martin (LMT) Stock Analysis | Undervalued Dividend Growth Stock of the Week

Lockheed Martin Corporation (LMT) is the world’s largest defense contractor.

Founded in 1912, Lockheed Martin is now a $92 billion (by market cap) global defense monstrosity that employs over 100,000 people.

The company reports results across four segments: Aeronautics, 40% of FY 2020 revenue; Rotary and Mission Systems, 25%; Space Systems, 18%; Missiles & Fire Control, 17%.

As it sits, the company has already increased its dividend for 19 consecutive years.

In fact, they just increased their dividend yet again in late September by nearly 8%.

That’s not terribly far off from the five-year dividend growth rate of 9.8%.

The stock also yields 3.4%.

That yield, by the way, is 80 basis points higher than its own five-year average.

It’s a very appealing combination of yield and growth.

The payout ratio is a moderate 51.6%, easily covering the dividend.

I see the “sweet spot” for dividend growth stocks to be a yield of between 2.5% and 3.5%, paired with a high-single-digit (or better) dividend growth rate.

This stock is in that spot in the sweetest possible way.

Shares are trading hands for a P/E ratio of 15.1.

That’s below the broader market by a good margin.
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It’s also substantially lower than its own five-year average of 22.4.

There’s also the matter of the P/CF ratio of 13.5 being well off of its own five-year average of 17.3.

Morningstar rates LMT as a 4-star stock, with a fair value estimate of $402.00.

CFRA is another professional analysis firm, and I like to compare my valuation opinion to theirs to see if I’m out of line.

They similarly rate stocks on a 1-5 star scale, with 1 star meaning a stock is a strong sell and 5 stars meaning a stock is a strong buy. 3 stars is a hold.

CFRA rates LMT as a 5-star “STRONG BUY”, with a 12-month target price of $463.00.

I came out slightly high. Averaging the three numbers out gives us a final valuation of $448.87, which would indicate the stock is possibly 38% undervalued.

Bottom line: Lockheed Martin Corporation (LMT) is a high-quality business across the board. They provide necessary products and services within the framework of a global oligopoly, all but guaranteeing plenty of future growth. With a 3%+ yield, high-single-digit dividend growth, nearly 20 consecutive years of dividend increases, a moderate payout ratio, and the potential that shares are 38% undervalued, this is one of my best long-term ideas for dividend growth investors.

#BestStockBuy #UndervaluedStock #CheapStocks $LMT

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[KevinModz]

Jason would you choose Lockheed Martin over General Dynamics right now?

[michaelgriffes]

You are so awesome Jason! I’ve followed you since the dividend mantra days about 5+ years ago. I also own one of your earlier books “5 steps to retire in 5 years”. I love LMT, I purchased a few shares around 370 and plan to buy all any I can under 350.

Did you see the ROE on it? It’s insane… price is what you pay, but value is what you get!

Thank you Jason and everyone else on this channel! You guys are awesome, thank you!

Ps please let us know your thoughts on INTC

[dr.s]

Thank you for the detailed look at LMT! I used the recent low to get in. Always happy when you publish a video about the same stock shortly after.

[j.mney]

Lockheed has over $140B in backlog and a ROIC of over 30%. Not to mention a dividend of over 3%! Amazing company to hold for the long term. That's what I am doing 💪.

[westleyanson]

Yeah…I don’t think so this time. I just sold out of my position when they reported earnings. Got out just in time. I do give you credit as I started a position in the Spring on your advice. Their forward looking statements stating they need to reevaluate their 5 year plan is very concerning. Without a major conflict happening, LMT just won’t do well. Look at what happened with the departure from Afghanistan…Earnings cratered.

[Kaloyan.Dimitrov]

My only problem with LMT is their debt which is way more than their assets.

[JiuJitsuLife-xrkb]

I was wondering when this video was coming

[youngjoe]

Just Bought my first share of this on Friday

[i_did_it_for_The_dividend]

Great video Jason. I bought the fire sale the day it tanked. Love LMT. Buying at these levels feels a lot like buying GD in the $130’s or RTX in the low $50’s. All the best to you and happy holidays mate.

[MsGorteck]

I am wondering I'd I should buy a share for my Roth. I think I am getting close to my yearly cap.
Could you do this for General Dynamic (GD)?

[EasternDreamer]

I've been loading LMT, its on sale!

[wong]

Well you have a near peer adversary spending monies like water on building out their own air force, navies, hypersonic+ ballistic/nuclear programs. So ..

[richiebettles]

LMT great company..I think I'm going to double my position...lol..only have 1 share .. but slowly trying to build portfolio full of great companies that I believe in...You explain the fundamentals really well ..

[starwreck]

I bought LMT in March now it's back to about the same price I paid for it. I think I'll go shopping again.

[artkrueger]

I got in to LMT during the dip. I might buy some more. I really like the dividend growth rate.

[hansschotterradler]

I may add a couple of shares this week.

[RetireandGo]

Great company with customers that have plenty of money to buy products

[marshabonforte]

“Dirt Cheap” is an exaggeration! I’d call LMT a fair valuation. Certainly worth owning.

[timothymcnally]

Thanks everyone for the information, appreciated

[arigutman]

Excellent video, Jason! I just filmed a video today too on LMT, you beat me to it! Lockheed is a rock solid dividend play that I recently sold out of Boeing for to buy LMT. They also just secured two big contracts with the US govt. all around exceptional play, 🚀 🚀