How much will Lockheed Martin pay in dividends this year?

Investors often choose U.S. defense stocks because they are tied to relatively safe companies. The U.S. government is a reliable customer, and there is no shortage of geopolitical tensions, leading to increased demand for defense spending around the world. Additionally, stocks like Lockheed Martin (LMT -0.01%) tend to pay increasing dividends.

The chart below shows the stock’s dividend per share, earnings per share, and free cash flow per share ratios so you can see how well covered its dividend is.

LMT Free Cash Flow per Share data by YCharts

Dividend payment in 2024

This good health will continue in 2024. The defense company’s current quarterly dividend is $3.15 per share, and the dividend currently yields about 2.3%. The midpoint of management’s 2024 earnings per share guidance is $26.35, and the 2024 dividend per share will be $12.60. This year’s payout will be about $3.04 billion, and management expects free cash flow of $6 billion to $6.3 billion in 2024.

In other words, Lockheed Martin plans to pay out just under 50% of its earnings and cash flow as dividends. This payout ratio leaves room for growth, especially if Lockheed Martin can continue to grow its earnings and cash flow in line with historical norms.

That seems likely, although investors shouldn’t be too quick to assume that increased defense orders will translate into rapid earnings and cash flow growth. As I’ve discussed before, many defense companies, including Lockheed Martin, are struggling to expand margins because of problematic fixed-price programs that were entered into during less inflationary times.

As such, Lockheed Martin should see solid rather than spectacular dividend growth, which could suit many investors.