Lockheed Martin Corporation (LMT), The Boeing Company (BA): Defense, Dividends, and Sequestration: What Investors Need to Know.

Another thing to keep in mind is how defense contractors are paid. In defense contracting, it can take years to award a contract, obligate funding, and pay the defense contractor. When the money is finally transferred from the U.S. Treasury to the company, it becomes an outlay, or what’s known as backlog for a company. Sequestration won’t affect money that’s already been obligated, and as a result, the effects of sequestration on defense contractors will be gradual, taking three to four years for them to feel the full impact. And like I’ve said before, these companies have been preparing for this, and as a result, aren’t being caught with their pants around their ankles.

Last, and I can’t say this enough, defense contractors provide a service that only they can. They are essential to the military, and the military is essential to America. Neither is going anywhere anytime soon. Consequently, I wouldn’t be too worried about your defense dividends.

The article Defense, Dividends, and Sequestration: What Investors Need to Know. originally appeared on Fool.com and is written by Katie Spence.

Fool contributor Katie Spence owns shares of Northrop Grumman, and is still hoping people panic so she can get more for cheap. Follow her on Twitter @TMFKSpence. The Motley Fool owns shares of Lockheed Martin and Northrop Grumman.

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