Stocks to buy

The 3 Top Dividend-Paying Defense Stocks to Buy for 2024

The world is a volatile place. Over the past few years, we’ve seen Russia invade Ukraine, various violent acts in the Middle East, and mounting tensions around Taiwan’s political status. All this has caused numerous countries to boost their military budgets to bolster their capabilities.

This makes it an intriguing time for investors in defense contractors, aerospace firms, and other related companies.

It’s not just terrestrial defense either. Investors should also be looking to the stars. Last week, Intuitive Machines (NASDAQ:LUNR) became the first private American company to land a spacecraft on the moon. Space looks like an increasingly vital sphere for both defense and commercial purposes going forward.

Another nice feature in this industry is its tendency for steady reliable dividends. All three of these dividend-paying defense stocks to buy yield at least 2.5% and have considerable share price upside as well.

Lockheed Martin (LMT)

Source: Joe Ravi / Shutterstock.com

Lockheed Martin (NYSE:LMT) is a global leader in the aerospace, defense, and space sectors. The company is known for fighter jets, but has a wide range of products spanning the defense industry. In addition, Lockheed’s space and satellites division generates more than $11 billion in annual revenues, making it a key player in that growth industry as well.

Lockheed Martin looks primed for expansion on several fronts. The war in Ukraine and ongoing hostilities in the Middle East are causing many countries to increase their defense spending.

In addition, space carries broad ramifications for both commercial and defense uses. As prices come down for satellite and launch services, the total addressable market expands. Space imagery and communications services are becoming increasingly vital for defense departments and industrial uses alike.

In addition to its own satellite efforts, Lockheed operates a venture-style investment portfolio that put money into smaller defense and space firms. It has partnerships and equity stakes in smaller firms such as Terran Orbital (NYSE:LLAP) that give Lockheed ownership in the next generation of aerospace ventures while locking in ties to key clients such as the U.S. Space Force.

Raytheon (RTX)

Raytheon (RTX) defense company logo hanging from glass building

Source: JHVEPhoto / Shutterstock.com

With 185,000 employees in total across its various business divisions, Raytheon (NYSE:RTX) is another giant in the defense sector.

Raytheon came about as a series of mergers and acquisitions. Of its groups, Pratt & Whitney is arguably the most important. It is a major growth vector for the company, especially as Airbus has put P&W engines into several of its newer jet models. On the other hand, P&W is currently undergoing a massive engine recall and repair program which will cost Raytheon billions and which has damaged the firm’s reputation.

While the company is definitely paying the price for its recent missteps, the market appears to have overreacted.

Raytheon is still trading for less than 17 times forward earnings as it goes through this current downturn. And the company has maintained its dividend; shares currently yield 2.6%. Morningstar’s Nicolas Owens believes that the market’s worries are overblown and that Raytheon shares are worth $112 per share. That offers considerable upside to the current market price of $89 per share.

Park Aerospace (PKE)

A photograph of two jet fighters flying above clouds. defense stocks

Source: Shutterstock

Sometimes a smaller company can pack a bigger punch. $300 million market capitalization firm Park Aerospace (NYSE:PKE) rounds out this list with its generous 3.5% dividend yield, which is currently the highest in the sector among American defense and aerospace companies.

Park has several lines of niche business for both commercial and military aircraft. These include advanced composite materials, film adhesives and lightning strike protection materials, along with inputs for rocket motors and nozzles.

This may not be the most glamorous part of the aerospace industry, but these components are vital for the safe handling of aircraft and space vehicles. Park has enjoyed relatively steady profits and revenues over the years, and is a consistent business.

In addition, the company has a fantastic balance sheet; it carries a significant pile of cash and has no debt. This ensures that the dividend is safe. Indeed, not only does Park pay its usual 3.5% ordinary dividend, but it has paid special dividends on occasion as well. For income investors wanting a small conservative aerospace operator, PKE stock is a great place to park some funds.

On the date of publication, Ian Bezek held a long position in LMT and RTX stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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