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My FI Journey » Investment portfolio » Recent Buy – Lockheed Martin (LMT)

Recent Buy – Lockheed Martin (LMT)

As part of my commitment to keep my readers up to date on my portfolio, I write up short posts describing my transactions.  Recently, I purchased 28 shares of Lockheed Martin (LMT).

These 28 shares have a total cost basis of $2472.03, which works out to about $88.29 per share.  I feel that this is a fair value, especially given currently overvalued nature of the market.  LMT’s current forward dividend is $4.60 per share.  So this amounts to a 5.21% starting yield.  This purchase will increase my dividend stream by $128.80 per year.  I feel that this is an excellent starting yield, made even more excellent by LMT’s history of dividend growth, low PE ratio, low-ish payout ratio, and the fact that the dividend discount models consider it to be undervalued.

I am a bit concerned about how recent news concerning defects in the F-35′s engines and overall reductions in military spending will affect the stock price.

Lockheed Martin

Lockheed Martin Corp is the world’s largest military weapons manufacturer producing aeronautics, electronics, space, and information systems for military use.   See my recent analysis of LMT for more detail.

Disclosure:  I am long LMT.

Readers:  What do you think of this purchase?

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10 Responses to "Recent Buy – Lockheed Martin (LMT)"

  1. LMT should still be fine, although I expect the DG to slow down barring a huge catalyst for rev/cash flow growth. The debt is the biggest worry for me. Without the debt they’d have a lot more cash freed up. I like the buy and have been bouncing back and forth between purchasing or not. That starting yield is great and even with modest DG going forward should still net you a nice return.

    1. MFIJ says:

      The debt is a bit worrisome, but it seems to be the norm for this particular company, and generally holding stable.

  2. Headed Home says:

    Pretty solid entry yield! I’m not too concerned about the F-35 issue either, but the sequester and cuts to defense spending would be somewhat worrying (short-term) to me – meaning I think there may be a better entry closer to $80. It’s hard to argue with this company’s great history. I’m sure you’ll be happy you bought LMT in a few years.

    1. MFIJ says:

      I’m not worried about any of the short term political theater surrounding the sequester and other cuts. This will play out just like every other spending face off has since 2011. An orgy of stupidity followed by kicking the can down the road sometime past the 11th or 12th hour.

  3. Mr. 1500 says:

    Are you worried about downsides such as the sequesteration and further government defense spending cuts? Perhaps this information is already priced into the stock.

    1. MFIJ says:

      I’m not worried at all about sequestration. That fiasco will be solved eventually probably by another round of can kicking. Longer term defense spending cuts are a bit worrisome, but I think that these cuts will not be as bad as people think. If we’re going to keep a modern military we’re going to have to keep buying equipment from companies like LMT. We may just buy a little less, at least in the near term.

  4. That is an awesome yield. I don’t really like buying individual company stocks, but if I did they would have to be dividend producing. Lockheed Martin is definitely a pretty cool company too.

    1. MFIJ says:

      You should consider buying positions in 30-40 solid dividend paying stocks. Roughly the same diversity as an index fund with considerably less maintenance fees.

  5. That is a very good yield, so I think it’s worth it. My one reservation is the same as Mr. 1500 in terms of the sequestration and possible further cuts. I have not followed it enough to know whether or not it’s priced in or not.

    1. MFIJ says:

      It’s probably all priced in. The sequester will likely turn out to be nothing. And we have some end of March budget issues to deal with as well. I’m not even worried any more. The current government is so dysfunctional that everyone basically expects them to wait until the deadline has passed and then pass something that effectively kicks the can down the road for a year or so.

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