Lockheed Martin Corp. LMT recently announced plans to reward shareholders with a sturdy dividend hike of 9.1%. Alongside, its management has authorized a new share repurchase authorization program of approximately $3.3 billion, replacing the existing one worth $3 billion.
Dividend Hike
Lockheed Martin will now pay a quarterly dividend of $2.40 per share, up from $2.20 paid earlier, bringing its annualized dividend to $9.60. The company will pay the revised dividend on Dec 27, 2019, to stockholders of record as on Dec 2, 2019.
Notably, the company has increased its dividend per share by more than 46.3% over the 2014-2018 period, reflecting an average annual increase of around 9.26%. Currently, the dividend yield of the company is pegged at is 2.48%, based on its latest share price of $387.87, which is better than the industry’s 1.97% and the S&P 500 Index’s 1.86%.
Share Repurchase Program
Lockheed Martin’s board of directors recently authorized the purchase of up to an additional $1 billion of common stock under its current share buyback program. During the first six months of 2019, the company repurchased 1.6 million shares of its common stock for $500 million. The total remaining authorization for future common share repurchases under the program was $2.5 billion as of Jun 30, 2019.
With this increase, the total remaining authorization for future repurchases is approximately $3.3 billion. Lockheed Martin’s management is yet to decide the timing and volume of repurchases.
Our View
The company's strong operational performance, financial stability and positive outlook support its continued investments in innovative products and services as well as select acquisitions and partnerships. This, in turn, drives Lockheed Martin's overall growth and helps it continue with its balanced, value-creating cash deployment strategies.
The company's raised dividend and new share buyback authorization indicate its optimism in its large and diverse order backlog, which is expected to continue in witnessing a conducive environment ahead.
With Lockheed Martin successfully delivering 412 F-35 Lightning aircraft during the first six months of 2019, its cash flow has been exceeding expectations. Notably, the company generated $3.33 billion of operating cash flow by the end of second-quarter 2019, which surged a whopping 495% year over year. Such solid operating cash flow generation continues to be the primary source of funding dividend hikes and share repurchases.
Price Performance
Shares of Lockheed Martin have rallied 11.5% in the past 12 months compared with the industry’s growth of 3.2%.
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Zacks Rank & Other Key Picks
Lockheed Martin currently carries a Zacks Rank #2 (Buy).
A few other similar-ranked stocks in the same space are Heico Corporation HEI, Safran SA SAFRY and General Dynamics Corp. GD. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Heico came up with average positive earnings surprise of 1.19% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 4.1% to $2.30 over the past 60 days.
Safran SA’s Zacks Consensus Estimate for 2019 earnings has risen 7.4% to $1.74 in the past 60 days. Its year-over-year growth estimate for 2019 currently stands at 40.33%.
General Dynamics’ long-term growth estimates currently stand at 8.7%. The Zacks Consensus Estimate for 2019 earnings has risen 0.17% to $11.88 in the past 60 days.
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