High-Yield Stocks Face Dividend Cut Risks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy LMT?
Source: NASDAQ.COM
- Importance of Dividend Growth: According to data from Ned Davis Research and Hartford Funds, over the past 50 years, the average dividend payer in the S&P 500 has delivered a 9.2% annualized total return compared to just 4.3% for non-payers, highlighting the superiority of dividend growth stocks in long-term investing.
- Risks of High-Yield Stocks: While the Global X SuperDividend U.S. ETF offers a nearly 7% distribution yield, its holdings of high-yield stocks face greater risks of dividend cuts, exemplified by LyondellBasell's 50% payout reduction this year, indicating potential flaws in high-yield strategies.
- Performance of Quality Dividend Stocks: The Schwab U.S. Dividend Equity ETF, which invests in 100 high-quality, high-yield dividend stocks, has achieved over 11% annualized returns, demonstrating success in dividend growth, particularly with Lockheed Martin increasing its dividend for 23 consecutive years.
- Shift in Investment Strategy: Investors should avoid selecting stocks solely based on yield, as high-yield stocks often come with the risk of dividend cuts; instead, focusing on ETFs centered around dividend growth, like the Schwab U.S. Dividend Equity ETF, can lead to more robust investment returns.
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Analyst Views on LMT
Wall Street analysts forecast LMT stock price to fall
12 Analyst Rating
4 Buy
7 Hold
1 Sell
Hold
Current: 652.830
Low
430.00
Averages
535.50
High
605.00
Current: 652.830
Low
430.00
Averages
535.50
High
605.00
About LMT
Lockheed Martin Corporation is a global aerospace and defense company. The Company is engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. Its segments include Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft. MFC segment provides air and missile defense systems, manned and unmanned ground vehicles, energy management solutions, and others. RMS segment designs, manufactures, services and supports various military and commercial helicopters, surface ships, sea and land-based missile defense systems, and others. Its Space segment is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive systems.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Lockheed Martin Earnings Outlook Highlights Key Metrics
- Stock Performance: Lockheed Martin (LMT) closed at $646.09, down 1.03% from the previous day, underperforming the S&P 500's 0.61% decline, indicating relative weakness amid overall market softness.
- Earnings Expectations: The upcoming earnings report is projected to show earnings of $6.9 per share, reflecting a year-over-year decline of 5.22%, yet revenue is expected to reach $18.51 billion, indicating a 3.06% increase from the same quarter last year, showcasing the company's growth potential in adversity.
- Analyst Ratings: Lockheed Martin currently holds a Zacks Rank of #3 (Hold), with a 0.2% increase in the EPS estimate over the past 30 days, reflecting cautious optimism from analysts regarding the company's short-term profitability, which may influence investor confidence.
- Valuation Analysis: The company is trading at a forward P/E ratio of 21.85, below the industry average of 24.14, and a PEG ratio of 1.18 suggests that the stock is reasonably valued given future earnings growth expectations, potentially attracting value investors' interest.
See More
High-Yield Stocks Face Dividend Cut Risks
- Importance of Dividend Growth: According to data from Ned Davis Research and Hartford Funds, over the past 50 years, the average dividend payer in the S&P 500 has delivered a 9.2% annualized total return compared to just 4.3% for non-payers, highlighting the superiority of dividend growth stocks in long-term investing.
- Risks of High-Yield Stocks: While the Global X SuperDividend U.S. ETF offers a nearly 7% distribution yield, its holdings of high-yield stocks face greater risks of dividend cuts, exemplified by LyondellBasell's 50% payout reduction this year, indicating potential flaws in high-yield strategies.
- Performance of Quality Dividend Stocks: The Schwab U.S. Dividend Equity ETF, which invests in 100 high-quality, high-yield dividend stocks, has achieved over 11% annualized returns, demonstrating success in dividend growth, particularly with Lockheed Martin increasing its dividend for 23 consecutive years.
- Shift in Investment Strategy: Investors should avoid selecting stocks solely based on yield, as high-yield stocks often come with the risk of dividend cuts; instead, focusing on ETFs centered around dividend growth, like the Schwab U.S. Dividend Equity ETF, can lead to more robust investment returns.
See More
Analysis of Dividend Stock Investment Strategies
- Dividend Stock Performance: According to data from Ned Davis Research and Hartford Funds, over the past 50 years, S&P 500 dividend payers have achieved an annualized total return of 9.2%, compared to just 4.3% for non-payers, highlighting the strong performance of dividend stocks and attracting investor interest.
- Importance of Dividend Growth: The data shows that dividend growth stocks delivered an annualized return of 10.2%, while companies that cut or eliminated dividends performed poorly with an annualized return of -0.9%, indicating that investors should prioritize dividend growth-focused ETFs for higher returns.
- ETF Selection Advice: The Global X SuperDividend U.S. ETF offers a nearly 7% distribution yield, which is appealing; however, due to the high-risk stocks it holds that may face dividend cuts, investors should exercise caution in their selection.
- Recommended Quality Dividend ETF: The Schwab U.S. Dividend Equity ETF screens for high-quality dividend stocks, achieving an annualized return exceeding 11%, with its holdings experiencing over 8% dividend growth over the past five years, demonstrating its advantages in long-term investing.
See More
Iran War Disrupts Global Oil Prices and Supplies
- Oil Price Surge: The ongoing Iran war has pushed Brent crude oil futures above $100 per barrel for the second consecutive day, marking a more than 40% increase since the conflict began, which could have profound implications for the global economy, particularly for oil-importing nations.
- Supply Chain Disruption: Energy supplies through the Strait of Hormuz are choked off due to the war, leading to a temporary halt in oil-loading operations at the UAE's Fujairah port after a fire, although operations have since resumed, highlighting the vulnerability of supply chains and the potential for future energy crises.
- Escalation of Military Actions: President Trump has ordered bombing raids on Iranian military targets, specifically targeting the oil export hub on Kharg Island for the first time, a move that could further escalate tensions in the region and impact the stability of global oil markets.
- Major Event Cancellations: The war's impact has led Formula 1 to cancel upcoming Grand Prix races in Bahrain and Saudi Arabia scheduled for April, reflecting the widespread effects of the conflict on international events, which could affect related economic interests and tourism.
See More
NASA Adjusts Artemis Program Timeline for Moon Landings
- Artemis Program Delays: NASA announced that the Artemis II mission will be delayed until April, and the Artemis III mission will no longer land on the moon in 2028 but will instead practice docking in Low Earth Orbit, which, while seemingly bad news, actually lays the groundwork for future missions.
- Increased Launch Cadence: NASA plans to move Artemis III to 2027 for docking practice, followed by Artemis IV conducting the actual moon landing in 2028, with a goal of launching every 10 months, significantly increasing launch frequency and potentially achieving two moon landings in 2028.
- Cost Control Strategy: To reduce the $4.1 billion cost per launch, NASA has decided to standardize Boeing's SLS rocket design by adopting the proven Centaur 5 second stage instead of the originally planned more powerful version, thereby speeding up production and lowering costs.
- Impact on Space Industry: Artemis IV will be the first SLS rocket to utilize the Centaur second stage, and this standardization not only helps reduce launch costs but also positions Boeing and its partners more competitively in Congress, potentially preventing the handover of contracts to SpaceX.
See More
Strong Dividend ETF Recommendation
- Dividend Yield: The Schwab U.S. Dividend Equity ETF (SCHD) recently offers a dividend yield of 3.3%, providing a stable income source amidst current economic uncertainties, appealing to defensive investors.
- Historical Performance: Since its inception in 2011, the ETF has achieved an average annual return of 13.30%, with a 15.67% return over the past year, demonstrating strong performance in volatile markets and boosting investor confidence.
- Portfolio Strength: SCHD holds approximately 100 stocks, including blue-chip companies like Lockheed Martin, Coca-Cola, and PepsiCo, ensuring investment diversity and stability, thereby providing long-term capital appreciation potential for investors.
- Long-Term Investment Returns: Investing $1,200 annually, with an assumed annual return of 10%, could yield around $68,730 after 20 years, highlighting the ETF's appeal as a long-term investment vehicle.
See More
Lockheed Martin Earnings Outlook Highlights Key Metrics
- Stock Performance: Lockheed Martin (LMT) closed at $646.09, down 1.03% from the previous day, underperforming the S&P 500's 0.61% decline, indicating relative weakness amid overall market softness.
- Earnings Expectations: The upcoming earnings report is projected to show earnings of $6.9 per share, reflecting a year-over-year decline of 5.22%, yet revenue is expected to reach $18.51 billion, indicating a 3.06% increase from the same quarter last year, showcasing the company's growth potential in adversity.
- Analyst Ratings: Lockheed Martin currently holds a Zacks Rank of #3 (Hold), with a 0.2% increase in the EPS estimate over the past 30 days, reflecting cautious optimism from analysts regarding the company's short-term profitability, which may influence investor confidence.
- Valuation Analysis: The company is trading at a forward P/E ratio of 21.85, below the industry average of 24.14, and a PEG ratio of 1.18 suggests that the stock is reasonably valued given future earnings growth expectations, potentially attracting value investors' interest.
See More
High-Yield Stocks Face Dividend Cut Risks
- Importance of Dividend Growth: According to data from Ned Davis Research and Hartford Funds, over the past 50 years, the average dividend payer in the S&P 500 has delivered a 9.2% annualized total return compared to just 4.3% for non-payers, highlighting the superiority of dividend growth stocks in long-term investing.
- Risks of High-Yield Stocks: While the Global X SuperDividend U.S. ETF offers a nearly 7% distribution yield, its holdings of high-yield stocks face greater risks of dividend cuts, exemplified by LyondellBasell's 50% payout reduction this year, indicating potential flaws in high-yield strategies.
- Performance of Quality Dividend Stocks: The Schwab U.S. Dividend Equity ETF, which invests in 100 high-quality, high-yield dividend stocks, has achieved over 11% annualized returns, demonstrating success in dividend growth, particularly with Lockheed Martin increasing its dividend for 23 consecutive years.
- Shift in Investment Strategy: Investors should avoid selecting stocks solely based on yield, as high-yield stocks often come with the risk of dividend cuts; instead, focusing on ETFs centered around dividend growth, like the Schwab U.S. Dividend Equity ETF, can lead to more robust investment returns.
See More
Analysis of Dividend Stock Investment Strategies
- Dividend Stock Performance: According to data from Ned Davis Research and Hartford Funds, over the past 50 years, S&P 500 dividend payers have achieved an annualized total return of 9.2%, compared to just 4.3% for non-payers, highlighting the strong performance of dividend stocks and attracting investor interest.
- Importance of Dividend Growth: The data shows that dividend growth stocks delivered an annualized return of 10.2%, while companies that cut or eliminated dividends performed poorly with an annualized return of -0.9%, indicating that investors should prioritize dividend growth-focused ETFs for higher returns.
- ETF Selection Advice: The Global X SuperDividend U.S. ETF offers a nearly 7% distribution yield, which is appealing; however, due to the high-risk stocks it holds that may face dividend cuts, investors should exercise caution in their selection.
- Recommended Quality Dividend ETF: The Schwab U.S. Dividend Equity ETF screens for high-quality dividend stocks, achieving an annualized return exceeding 11%, with its holdings experiencing over 8% dividend growth over the past five years, demonstrating its advantages in long-term investing.
See More
Iran War Disrupts Global Oil Prices and Supplies
- Oil Price Surge: The ongoing Iran war has pushed Brent crude oil futures above $100 per barrel for the second consecutive day, marking a more than 40% increase since the conflict began, which could have profound implications for the global economy, particularly for oil-importing nations.
- Supply Chain Disruption: Energy supplies through the Strait of Hormuz are choked off due to the war, leading to a temporary halt in oil-loading operations at the UAE's Fujairah port after a fire, although operations have since resumed, highlighting the vulnerability of supply chains and the potential for future energy crises.
- Escalation of Military Actions: President Trump has ordered bombing raids on Iranian military targets, specifically targeting the oil export hub on Kharg Island for the first time, a move that could further escalate tensions in the region and impact the stability of global oil markets.
- Major Event Cancellations: The war's impact has led Formula 1 to cancel upcoming Grand Prix races in Bahrain and Saudi Arabia scheduled for April, reflecting the widespread effects of the conflict on international events, which could affect related economic interests and tourism.
See More
NASA Adjusts Artemis Program Timeline for Moon Landings
- Artemis Program Delays: NASA announced that the Artemis II mission will be delayed until April, and the Artemis III mission will no longer land on the moon in 2028 but will instead practice docking in Low Earth Orbit, which, while seemingly bad news, actually lays the groundwork for future missions.
- Increased Launch Cadence: NASA plans to move Artemis III to 2027 for docking practice, followed by Artemis IV conducting the actual moon landing in 2028, with a goal of launching every 10 months, significantly increasing launch frequency and potentially achieving two moon landings in 2028.
- Cost Control Strategy: To reduce the $4.1 billion cost per launch, NASA has decided to standardize Boeing's SLS rocket design by adopting the proven Centaur 5 second stage instead of the originally planned more powerful version, thereby speeding up production and lowering costs.
- Impact on Space Industry: Artemis IV will be the first SLS rocket to utilize the Centaur second stage, and this standardization not only helps reduce launch costs but also positions Boeing and its partners more competitively in Congress, potentially preventing the handover of contracts to SpaceX.
See More
Strong Dividend ETF Recommendation
- Dividend Yield: The Schwab U.S. Dividend Equity ETF (SCHD) recently offers a dividend yield of 3.3%, providing a stable income source amidst current economic uncertainties, appealing to defensive investors.
- Historical Performance: Since its inception in 2011, the ETF has achieved an average annual return of 13.30%, with a 15.67% return over the past year, demonstrating strong performance in volatile markets and boosting investor confidence.
- Portfolio Strength: SCHD holds approximately 100 stocks, including blue-chip companies like Lockheed Martin, Coca-Cola, and PepsiCo, ensuring investment diversity and stability, thereby providing long-term capital appreciation potential for investors.
- Long-Term Investment Returns: Investing $1,200 annually, with an assumed annual return of 10%, could yield around $68,730 after 20 years, highlighting the ETF's appeal as a long-term investment vehicle.
See More
