How much dividend will Lockheed Martin pay this year?

Investors often choose U.S. defense stocks because they are tied to relatively safe companies. The U.S. government is a reliable customer, and there is no shortage of geopolitical tensions around the world that drive increased demand for defense spending. In addition, stocks like Lockheed Martin (LMT -0.01%) tend to pay increasing dividends.

The chart below shows dividend per share, earnings per share and free cash flow per share, so you can see how well the company covers its dividend.

LMT Free Cash Flow Per Share Data by YCharts

Dividend payment in 2024

That healthy coverage will continue into 2024. The defense company’s current quarterly dividend is $3.15 per share, and the dividend currently yields about 2.3%. The midpoint of management’s 2024 earnings per share forecast is $26.35, with a 2024 dividend of $12.60 per share. This year’s payout will be about $3.04 billion, and management expects between $6 billion and $6.3 billion in free cash flow in 2024.

In other words, Lockheed Martin plans to pay out just under 50% of its earnings and cash flow as dividends. This payout ratio has room to grow, especially if Lockheed Martin can continue to grow earnings and cash flow to historical norms.

That seems likely, although investors shouldn’t be too quick to assume that increased defense orders will translate into rapid profit and cash flow growth. As I’ve mentioned before, many defense companies, including Lockheed Martin, are struggling with margin expansion due to troubled fixed-price programs backed by lower inflation.

As a result, Lockheed Martin is likely to generate solid but unspectacular dividend growth, which may suit many investors.