There’s still plenty of time for opportunistic income investors to take advantage of both lifts.
We can’t say that October is a traditionally hot time for dividend raises, but a smattering of publicly traded companies chose the spooky month for their latest payout hikes. Among the better-known lifters were a pair of sturdy industrial sector mainstays, Lockheed Martin (LMT 1.29%) and Honeywell (HON 0.78%). Here’s a look at this fresh pair of dividend raises.
1. Lockheed Martin
Being the largest pure-play defense company on this planet gives Lockheed Martin a great deal of power on the market. It also helps power its payout to ever-higher altitudes. The company wasn’t shy about mentioning that its latest quarterly dividend raise — by nearly 5% over its predecessor, to $3.30 per share — marks the 22nd year in a row it’s upped the distribution.
The beauty of being an active and busy U.S. defense contractor is the prizes a company can earn purely from major government contracts. Our armed forces want contractors they can rely on for many years, so deals in this business can be quite long in duration. They are also lucrative, given the sophisticated hardware required and the immense size of federal coffers.
Lockheed Martin has been a go-to defense producer for decades. It’s no accident that it’s the prime contractor in the F-35 program, taking the lead with the most sophisticated fighter jet in history. These days, we happen to live in a world with high-stakes conflicts either in progress or primed and ready to launch. It wasn’t surprising, then, that the company boosted its sales by 9% year over year in its most recently reported quarter to over $18 billion.
We’re barely one week away from Lockheed Martin’s scheduled third-quarter earnings release. Analysts are expecting continued top-line growth (by almost 4% to nearly $17.4 billion). Although profitability is expected to slump to $6.47 per share from the year-ago $6.73, the former is still well in the black. At the same time, the company’s free cash flow is more than high enough to keep raising the payout, so there are no worries on that front.
Lockheed Martin will pay that raised dividend on Dec. 27 to investors of record as of Dec. 2. At the most recent closing share price, it would yield 2.2%.
2. Honeywell
Elsewhere in the industrial sector, we have the sprawling engineering company Honeywell. Similar to Lockheed Martin, Honeywell’s board of directors recently approved a dividend raise approaching 5%, in this case to $1.13 per quarter. With the move, Honeywell has declared at least one dividend raise annually for 14 years in a row.
While this payout profile is close to that of Lockheed Martin, unfortunately Honeywell isn’t quite as soaring in terms of performance. It’s difficult to effectively manage sprawl, and the storied company has been stumbling over the past few years. Its big throw on the once-promising internet of things (IoT) market has yet to pay off meaningfully, and it isn’t a dominant player in any industrial segment that’s hot at the moment.
Honeywell’s financials tell the tale. Following pandemic-era slumps in both revenue and, especially, profitability, the company has yet to reach pre-pandemic levels in either metric.
That being said, it hasn’t done too badly of late. It managed to grow its top line by 5% year over year in the second quarter to nearly $9.6 billion, although only one of its four divisions — aerospace — saw meaningful growth (of 16%). Non-GAAP (adjusted) earnings per share, meanwhile, increased an encouraging 8% to $2.49.
At the end of 2023, Honeywell management said it would “align” its immense product portfolio to three significant global trends — automation, the future of aviation, and the transition to green energy. It takes time to course-correct a ship this large, so patience will be necessary with the company. Given its history and its vast resources, I’d give it more than a fighting chance to succeed. The Honeywells of this world usually don’t stay down forever.
The company’s new dividend is to be handed out on Dec. 6 to stockholders of record as of Nov. 15. It would yield 2.1%.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
