Lockheed Martin Corporation (LMT) & The Boeing Company (BA): Is It Time to get Into Defense Stocks?

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Profitability and dividend

Despite the drop in revenues, these companies continue to show high profit margins: Northrop Grumman is leading the way with nearly 12.4% profit margin. In comparison, Lockheed Martin Corporation (NYSE:LMT)’s profitability is 10.1% – an increase from the parallel quarter in 2012 at 9.2%; Boeing’s profit margin is 8.1% – very close to last year’s profit margin. The high and stable profit margins translate into high dividend yields in which Lockheed Martin Corporation (NYSE:LMT) leads the way with an annual yield of 4.24%. The Boeing Company (NYSE:BA)’s annual dividend yield is the lowest at 1.9%. Northrop Grumman Corporation (NYSE:NOC) is in the middle of the pack at 2.95%.

This means, even if these companies’ revenues won’t grow they will maintain their high profitability and keep offering relatively high dividend yield.

Take away

Leading defense companies are likely to be adversely affected by the future U.S government budgets cuts. Moreover, they may also show poor growth in revenues. Despite the expected drop in revenues, these companies still have high profit margins, high dividend yields and their valuation isn’t high for the industry. These factors still make these companies good investments to consider.

Lior Cohen has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin Corporation (NYSE:LMT) and Northrop Grumman Corporation (NYSE:NOC).

The article Is It Time to get Into Defense Stocks? originally appeared on Fool.com.

Lior is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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