The board of Lockheed Martin Corporation (NYSE:LMT) has announced that it will be paying its dividend of $3.30 on the 27th of December, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

View our latest analysis for Lockheed Martin

Lockheed Martin's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Lockheed Martin was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 12.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Lockheed Martin Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $5.32 in 2014 to the most recent total annual payment of $13.20. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Lockheed Martin Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Lockheed Martin has seen EPS rising for the last five years, at 6.5% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Lockheed Martin Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Lockheed Martin is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Lockheed Martin that you should be aware of before investing. Is Lockheed Martin not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.