- A 3% yield and 10% capital gain, while the military is retrenching, is a good start.
- Lockheed Martin basically produces the US Air Force, the military arm most often used by our Commander in Chief.
- For a President seeking to project power, this is the play.
If you like Donald Trump, if you expect him to become the next President, what should you do with your money?
You can’t do better than buying Lockheed Martin (NYSE:LMT) stock.
The company, formed by a $11 billion merger in 1994, now has a market cap of $66 billion. You get a dividend yield of 3% and the shares have advanced 10% over the last year.
Lockheed Martin is the country’s largest defense contractor by far, with contracts worth $11 billion in the current fiscal year. It produces most of the U.S. Air Force, which projects American power around the globe. That makes it the most heavily-used arm of the military, and thus it has the biggest spare parts business of them all.
Lockheed’s dominance with the U.S. military also brings it orders from allies. In December, for instance, the company got $1.3 billion in orders for anti-ballistic missile interceptors that will go into Qatar, Saudi Arabia and South Korea. It won a $914 million contract in Singapore and a $5.3 billion order for Super Hercules transport planes.
In a world filled with hot spots, in Syria, Yemen, Libya and Somalia, and with oil producers actively engaged with one another while continuing to pump oil as fast as they possibly can, Lockheed is in a good position to continue racking up more orders, even if the U.S. decides to downsize.
But that is unlikely to happen. The chief criticism of President Obama from the Republican Congress, and Republican Presidential candidates, is that the military is not active enough. Investing on that is speculative, but even if a Democrat is elected there is likely to be little pressure to back-off.
Lockheed Martin is also active in military cyber security even as it exits the commercial business. The U.S. government spends nearly $100 billion on information technology each year, and security is a growth area.
Lockheed Martin stock is something you buy for yield, not for capital gains, although it should hold its value well. Over the last year, the stock price is up almost 10%, but the $1.65/share dividend still yields 3.07% at current price. The company turned short-term debt into long-term debt during the December quarter, locking in low interest rates, and it generated $5 billion in operating cash flow during the latest quarter.
Even if Donald Trump remains a private citizen, in other words, this is a safe stock to own.