NEW YORK (TheStreet) --Lockheed Martin (LMT) continues to be one of the most rewarding stocks for dividend-hungry investors. On a total return basis shares of the world's largest defense contractor are up 17% year-to-date including its 3.10% dividend yield based on a sustainable 53% payout ratio.
One reason Lockheed Martin keeps hitting new 52-week highs involves its prowess at winning defense contracts. A recent lucrative example is a $194 million modification contract for procurement of material, equipment and supplies to develop and test the Aegis Ballistic Missile Defense System.
Headquartered in Bethesda, Md., Lockheed Martin defines itself as a "global security and aerospace company" that employs about 113,000 people worldwide. Last year the company had net sales of $45.4 billion, an amount that will be challenging to equal in 2014.
The company recently raised its 2014 earnings guidance, reflecting lower pension costs and an improved outlook for its space unit. For the quarter ending Sept. 30 I anticipate an increase in EPS of about 9%.
Thanks to the amount of new business Lockheed captured earlier in 2014 I also project that its fourth quarter EPS will be nearly 40% higher than the year-ago quarter. With a final quarter of that magnitude the year-over-year total earnings growth is likely to exceed 17%.
This shouldn't be surprising to those watching the company's growing amount of new business. Including the Aegis Missile Defense contract, Lockheed has booked more than $435 million in orders during August so far.
One of those big orders was a $116.7 million firm-fixed-price contract modification to buy parts needed to build the latest version of the C-130J. By the way Aug. 23 marks the 60th anniversary of the first flight of Lockheed's C-130 Hercules from Burbank, Calif., in 1954.
The C-130 has the longest, continuous military aircraft production run in history and is one of the top three longest, continuous aircraft production lines of any type. Widely considered the world's most reliable flying workhorse, more than 2,500 C-130s have been ordered and/or delivered to 63 nations to date.
The success that Lockheed Martin continues to experience is reflected in this 5-year price chart of its stock.
LMT data by YCharts
The company's diluted trailing 12-month EPS began to skyrocket higher in the last quarter of 2010. With every leap in earnings the share price also soared, nearly doubling since the beginning of 2012 to today's level.
How high can shares fly? A $180 one year price target is reasonable from my research. If the company decides to split its stock and boost its dividend then my price target will be raised to at least $200.
Lockheed Martin is a company capable of accomplishments that can even defy the imagination. I just learned the company along with the U.S. Navy is testing a real life "Iron Man" exoskeleton suit.
It won the contract to evaluate and test the gear which "increases an operator's strength and endurance" for the Navy's industrial usage. No wonder Lockheed Martin and its high-flying stock are winning investors' confidence like never before.
At the time of publication, the author held no positions in the companies mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates LOCKHEED MARTIN CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate LOCKHEED MARTIN CORP (LMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.11% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LMT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has significantly increased by 56.82% to $977.00 million when compared to the same quarter last year. In addition, LOCKHEED MARTIN CORP has also vastly surpassed the industry average cash flow growth rate of -19.74%.
- LOCKHEED MARTIN CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LOCKHEED MARTIN CORP increased its bottom line by earning $9.04 versus $8.34 in the prior year. This year, the market expects an improvement in earnings ($11.25 versus $9.04).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Aerospace & Defense industry average. The net income increased by 3.5% when compared to the same quarter one year prior, going from $859.00 million to $889.00 million.
- LMT, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: LMT Ratings Report