(LMT) Lockheed Martin Increases Dividend – Adds Buyback

Lockheed Martin Corporation (LMT) has increased its quarterly dividend to $1.00 per share and has authorized purchase of up to an additional $2.5 billion of its common stock under the share repurchase program.

Lockheed has increased its quarterly dividend by 33% or 25 cents from its prior dividend of 75 cents. This will result in an annualized dividend of $4.00 per share. The increased quarterly dividend will be paid on December 30, 2011 to holders of record as of the close of business on December, 1, 2011.

This is the ninth consecutive annual dividend increase. The last dividend hike was in September 2010 when the company increased the quarterly payout by 19% to 75 cents.

Under the share repurchase program, the number of shares purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation. The company’s share repurchase program provides for the repurchase of common stock from time-to-time, up to an authorized amount of $3 billion. The company had repurchased 13 million shares for a total of $1 billion and disbursed $258 million as dividends in second-quarter 2011.

In July this year, Lockheed Martin Corporation reported strong second quarter fiscal 2011 earnings of $2.06 per share, sailing past the Zacks Consensus Estimate of $1.94. At the end of the second quarter of 2011, cash and cash equivalents were $3.27 billion versus $2.26 billion at fiscal-end 2010. Long-term debt rose marginally to $5.03 billion versus $5.02 billion at fiscal-end 2010.

On October 17, 2011, the company is expected to release its third quarter results. The Zacks Consensus Estimates for third quarter 2011 and fiscal year 2011 are currently at $1.80 per share and $7.53 per share, respectively.

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. Also, the company ensures a steady shareholder return given its focus on debt repayment, its ongoing share repurchase program and the incremental dividend.

In reality, these positives are offset by defense budget cuts, headwinds in margins, higher pension liability and risk regarding retrenchment cost recovery. However, we believe market pessimism is fully accounted for in the current valuation, which is priced at a discount to both its industry peers and the overall market. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security company that is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The company mainly competes with Northrop Grumman Corporation (NOC) and Raytheon Company (RTN).

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

RAYTHEON CO (RTN): Free Stock Analysis Report

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