Owning Shares of Lockheed Martin (LMT) Has Been Awesome

We may earn money or products from the companies mentioned in this post.

One of my favorite topics to talk about here on The Money Sprout is passive income. Specifically the passive income that we are earning from owning dividend stocks. This year alone (2017), we are on pace to earn over $2,400 in dividend income.

Each year as we invest more money into dividend stocks, that passive income stream grows and grows. For the past several years, we have been investing $10,000+ into our portfolio of dividend stocks.

By consistently investing $10,000+ a year, we are growing our future annual dividend income by at least $250 … likely more.

In addition to new investments, we feel it is important to reinvest the dividends we are earning. So this year, we will reinvest that $2,400 we earned in dividends. That is likely another $60 to $100 of future income each year.

The last way that we are growing this income stream takes no work on our part and is very “passive”. Almost every company that we own will give us an annual raise. Yep, that’s right. We don’t have to lift a finger … just sit back and collect a raise.

In the past 12 months … we have gotten small raises around 2% and big raises over 20%! All of these raises average out between 5% and 7% increases in dividend income. That is another $120 to $150 of extra income each year.

And the best part of that extra income? We don’t do very much to earn it. Plus that income is currently reinvested back so that it can earn more and more income.

The most recent dividend increase from a stock we own was from Lockheed Martin (LMT).

LMT Shareholders Get a 9.89% Raise

Lockheed Martin Corp. (LMT) recently announced an annual dividend increase. The company has been consistently raising dividends for the past 15+ years.

Company shareholders will now receive $2.00 in quarterly dividends for each share they own … instead of $1.82 paid previously. This increase meets our desired dividend growth rate of over 6%.

The latest increase bumps the annual dividend for LMT up to $8.00 per share compared to $7.28 just last quarter.

Overall, that is a 9.89% increase in dividend income!

Just think about that for a minute (or two) … a company we own is paying us $8 every year in passive income for each share we own. How sweet is that?

How Much Extra Income?

We currently only own 29.582 shares of LMT in our Money Sprout Index.

We purchased these shares (and earned DRiP shares) over the course of 5+ years through Computershare. Lockheed Martin is currently our highest paying dividend stock (in terms of dollars) that we own and is a well established building block of our portfolio.

This latest dividend increase has pushed our 12 month forward dividend income for LMT up to $236.65, compared to $215.36 last quarter.

That is an annual dividend income increase of $21.30! Truly amazing growth when it comes to dividend income earnings.

Whether they are large or small, all of these increases can really add up over the months and years.

With this latest increase by Lockheed Martin, along with recent stock purchases, dividend reinvestment, and other company announced increases … our annualized forward dividend income has risen to $2,770.75.

Dividend Growth for LMT

We have owned shares of Lockheed Martin (LMT) for over 5 years now. Just like McDonald’s (MCD) (mentioned last week), it has been one of the best dividend paying stocks that we have owned and continues to grow like crazy!

The company has been raising dividends for the past 15+ years. And the dividend growth (and share price) during that time has been outstanding!

Take a look at the annual dividend payments since 2012 –

  • 2012 – $4.15
  • 2013 – $4.78
  • 2014 – $5.49
  • 2015 – $6.15
  • 2016 – $6.77
  • 2017 – $7.46 (projected)

Note – The 2017 dividend has been prorated to reflect a dividend increase during the year (after the third quarter payout).

As you can tell from the numbers above, LMT dividends have been raised consistently by 10% or more over the past several years … which has been great for dividend investors.

Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. Lockheed Martin has shown much higher DGR’s above 6% over the past 10+ years.

Here are a few average growth rates for shares of Lockheed Martin

  • 1 Year DGR – 10.19% (2016 to 2017)
  • 3 Year DGR – 10.77% (2014 to 2017)
  • 5 Year DGR – 12.47% (2011 to 2017)

Overall, the dividend growth of the company has been in the double digits … which I love to see!

Lockheed Martin – Buy, Sell, or Hold?

We started buying shares of Lockheed Martin (LMT) back in June 2012 when we purchased $50 worth of stock (.6 shares) through Computershare. From 2012 to early 2014, we accumulated 25.714 shares month by month through automated investing in the company’s Direct Stock Purchase Plan (DSPP) … which is administered by Computershare. Investments ranged between $50 and $150 a month.

Due to rising administration costs in the company’s plan, we transferred our shares to a Fidelity account … where the shares continue to earn DRiP shares at no extra cost to us.

Since buying our first partial shares in 2012, we have earned $778.79 in dividends from Lockheed Martin. All of those dividends were reinvested back into an additional 3.868 shares through DRiP.

Here are a few stats from owning stock in Lockheed Martin

  • Total Investment – $2,650.00
  • Shares Purchased – 25.714
  • Dividends Earned – $778.79
  • DRiP Shares – 3.868

To date, we have earned back 29.4% of our overall investment in the company … just from dividends! Companies like this make dividend investing fun … and very profitable.

We are also earning an incredible 8.93% yield on cost on our shares of LMT. Only one other company in our portfolio is yielding a higher return on our investment.

And that yield is only going to grow … as time goes by and we keep reinvesting through DRiP and the company gives us annual raises.

While owning shares of Lockheed Martin over the past 5 years has been a pleasant surprise … it doesn’t necessarily mean we are buying new shares.

At the time of this writing, LMT meets SOME of our stock screen criteria based on the following metrics –

  • Current Yield – 2.58%
  • Payout Ratio – 62.99%
  • P/E Ratio – 24.43

The company meets some of the criteria that we look for when picking stocks. For example, the company does have a current yield >= 2% and dividend growth rates for 5 and 10 years way over the 6% threshold we look for.

However the payout ratio is over 60% (just barely) and the P/E ratio is well above the 20 or below mark we look for. LMT is just too expensive for us at this time. I am cheap and like purchasing bargains in the stock market.

Based on all of this, we have LMT as a solid HOLD for now. If the company were to ever announce a dividend cut … then we would sell all of our shares in the company, although that doesn’t look like it would happen for some time.

For now … we hold our shares and will continue to collect $200+ a year from the company!

Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – LMT, and MCD. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.

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