On Friday, I gave you all the reasons why I love the defense sector. Now, it’s time for the big “reveal” I promised you – my single-favorite defense sector stock. The company is …
Lockheed Martin (LMT, Rated “B”).
It’s no secret our country and our allies face threats all around – in North Korea, in the Middle East, and potentially even in Europe, depending on the actions of Russian President Vladimir Putin.
Keeping those threats (and others) at bay is where LMT comes in. The Bethesda, Maryland-based company is the largest U.S. defense contractor. It’s well-known for products like the Black Hawk military helicopter, the HIMARS artillery rocket mobile launch system, and the F-16 and F-35 fighter aircraft.
But it also produces the Aegis missile defense system, something that would come in handy if North Korea were to launch a first strike or retaliatory attack on South Korea, Japan, or Guam. The system was originally designed for use on Navy vessels, but its “Aegis Ashore” counterpart is already deployed or nearing deployment in Romania and Poland. Japan is reportedly talking with the U.S. about putting two systems in that country as well.
Lockheed is also a partner with Raytheon (RTN, Rated “A-”) on the Patriot missile system. The Saudis recently used one of its batteries to shoot down an incoming missile aimed at the capital city of Riyadh. And LMT produces the Terminal High Altitude Area Defense (THAAD) system, another missile defense product that’s already operating in South Korea and that Japan and Saudi Arabia may be purchasing next.
Now it’s true that LMT stumbled ever so slightly in the third quarter thanks to a change in accounting practices and a profit dip related to a couple of older weapons programs. But I think it’s just a short-term issue. Other investors apparently agree – because the stock is still up 28% year-to-date even after the October dip.
It doesn’t hurt that LMT also recently boosted its stock buyback program by $2 billion. Plus, it raised its quarterly dividend payout by 10% to $2 per share. That makes this the fifth straight year LMT has raised its dividend at double-digit annual rates, and puts the stock’s yield at around 2.3%.
Bottom line: No one wishes for more military conflicts, myself included. But we have to invest with a realistic view of the world, not an idealized one. LMT is helping keep our nation and our allies safe. Given its very solid Weiss Rating, I believe it’s also a safer, and potentially very profitable, investment for you.
Finally, as a reminder, you can get recommendations like LMT first … as well as specific “Buy” and “Sell” guidance for an entire portfolio of higher-yielding, rock-solid companies … in my High Yield Investing service. Be sure to check out the details here, or give my team a call at 877-934-7778 to get signed up today!
Until next time,