It’s time to both reflect on those giving service to the United States, and those who have sacrificed the most defending and protecting our country.
We honor and thank you.
There are also thousands of workers involved in our country’s defense and security. Perhaps it’s a good time to give them some recognition, too.
Here, then, are three companies that work toward our national defense, and can also provide solid returns for your portfolio…
Lockheed Martin (NYSE:LMT)
The largest defense contractor in the country, Lockheed Martin was founded in 1912 by brothers Allan and Malcolm Lockheed as the Alco Hydro-Aeroplane Company before changing it to Lockheed Aircraft.
In 1995, Lockheed merged with Martin Marietta, which incidentally was founded by Glenn L. Martin in the same year (1912) as Lockheed.
The merger created what today is the largest contractor in the United States, operating through five business segments: Aeronautics, Information Systems & Global Solutions, Missiles and Fire Control, Mission Systems and Training, and Space Systems.
Add all the groups together and it comes out to a $45.6 billion in revenues company with a current market capitalization of $67.55 billion, and a depth and breadth of defense products and programs unmatched in the United States, if anywhere else in the world.
Among those programs, this one in the Aeronautics group, is the F-35 stealth fighter, which will be introduced as a replacement for a number of U.S. Air Force, Navy and Marine combat aircraft.
Lockheed’s Mission Systems and Training group provided surface, air and undersea software programming for over 450 programs for the military, and its Missiles and Fire Control group develops, manufactures, and supports missile, unmanned systems and advanced combat systems.
Lockheed’s recently announced purchase of United Technologies (NYSE:UTX) world-famous Sikorsky Aircraft has set the stage for a possible sale of its Information Systems & Global Solutions group, which it has deemed no longer a core product.
In addition to its scale, depth and scope, investors should look at what Lockheed stock has done for its shareholders: LMT is up over 200% in the last five years, including a 14% gain year-to-date, far surpassing the S&P 500.
In addition, LMT is a dividend investors dream. Over the same five-year period of stock price appreciation, its dividend has increased from $3.00 per share annually to a sweet $6.60 per share, good today for a 3% dividend yield.
Lockheed’s backlog of $80 billion heading into 2015 puts it on a solid foundation for investors while it also continues to provide programs and hardware for our country.
Lockheed stock is a star on any and every level.
General Dynamics (NYSE: GD)
Global aerospace and defense giant General Dynamics got its start in 1952 manufacturing tanks, rockets, missiles, submarines and warships to all branches of the United States military.
In a huge about-face in the early 1990s, GD sold off most of its division except for its Electric Boat and Land systems in order to move into combat vehicle businesses, information technology capabilities, and later Gulfstream Aerospace.
Today GD is organized into four business groups: Aerospace, which includes Gulfstream; Combat Systems , which includes its main tank, tracked vehicle, and light armored vehicles; Information and Systems Technology; and Marine Systems, which includes its Electric Boat and Bath Iron Works nuclear-powered submarine shipyards.
GD’s Land Systems operation, located within the Combat Systems, manufactures and delivers the world-famous Abrams platform of tanks (which entered into service in 1980) to the U.S. Army, National Guard and Marine Corps.
Its United Kingdom operation delivers the British Army’s AJAX line of armored vehicles, and it’s light-armored Stryker vehicles, introduced in 2000, remain an industry standard.
With Pentagon budgets squeezed, GD has seen a flat revenue line over the past three fiscal years at around $30 billion, however earnings improved to just over $2.5 billion at the end of FY 2014.
Looking ahead to FY 2015, GD recently detailed a solid performance for Q3 (September 30), with sales growth of 3.1% for the quarter and a nice 5.3% increase in net profits.
General Dynamics stock is ahead nearly 8% year-to-date, and, like Lockheed, has rewarded shareholders quite nicely over the past five years, with a 118% gain on its shares.
GD is also a bit of a dividend star, growing its payout from $1.68 annually in 2010 to today’s $2.76 per share payout.
With its feet firmly planted in defense work for all branches of the Armed Services, GD is a winner for both the U.S. and investors.
Raytheon (NYSE: RTN)
Here’s a bit of a sleeper that falls under the radar.
Raytheon was actually founded in 1922 in Cambridge, Massachusetts by Vannevar Bush (later to become Dean of MIT’s School of Engineering), engineer Laurence Marshall, and scientist Charles G. Smith.
The three partners helped in the development of S gas rectifier tube technology that eliminated the need for batteries needed to fire up old radios.
During World War II Raytheon provided magnetron tubes for United States and British radar systems, and developed parts used in anti-aircraft shells.
Raytheon’s efforts also provided Patriot Missiles that intercepted Iraqi Scuds aimed at Israel and Saudi Arabia in the Persian Gulf War.
Today, Raytheon produces electronics systems, mission systems integration, command, control and communications (CCC) systems, and additional defense electronics systems.
With sales of just under $23 billion, Raytheon is at the lower end of our three defense plays, but in this case revenue size is immaterial.
Raytheon’s managed to increase its net income over the last three consecutive years, ending FY 2014 at $2.2 billion on that $23 billion in revenues.
Raytheon’s latest quarterly earnings report (September 30) showed a solid 5% gain in revenues to $5.5 billion, while operating cash flow from continued operations was $1.1 billion compared to $0.4 billion in 3Q 2014.
Raytheon’s backlog at the end of the quarter was up $0.3 billion compared to 2014.
Raytheon’s been good to investors, too. Year-to-date RTN is ahead 8.3%, and its five-year run clocks in at over 150%.
On the dividend side, RTN’s improved its payout from $1.72 per year to $2.68 per share, and at a 2.28% dividend yield, RTN is a nice piece for your portfolio.
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