Recent reports suggesting a potential conflict between Iran and Israel have raised concerns about global security. While defense stocks typically surge in such scenarios, Lockheed Martin (NYSE:LMT) stands out as an attractive investment option regardless of geopolitical developments.
Attractive Valuation Metrics
Trading at $453.18 per share, Lockheed Martin offers investors an appealing valuation. With a price-to-earnings ratio of 17.4x based on analysts’ forecasts of $26.04 earnings per share (EPS) for the current year, the stock appears undervalued. Moreover, the forward multiple drops to just 16.4x when considering next year’s projected EPS of $27.68. Additionally, the company’s dividend yield of 2.78% adds to its attractiveness for income-seeking investors.
Secure Dividend Yield and Financial Strength
Lockheed Martin’s robust financial position ensures the sustainability of its dividend payments. Despite significant capital expenditures, the company’s operating cash flow comfortably covers both dividend obligations and capital expenditure requirements. Notably, the company’s buyback program, amounting to over $6 billion in share repurchases, further enhances shareholder returns. This combination of dividend and buyback yields underscores the company’s commitment to shareholder value.
Strategy for Lowering Buy-In Cost
Investors seeking to enter the market at a lower cost can employ a strategy of shorting out-of-the-money (OTM) put options. By continuously selling nearby strike-put options with short-term expiration periods, investors can generate income while waiting for the stock price to decline. For example, selling put options with a strike price of $445, three weeks away from expiration, allows investors to collect premiums and potentially lower their effective buy-in price.
Conclusion
Lockheed Martin emerges as an attractive investment opportunity, offering value and income potential amidst market uncertainties. With a disciplined approach to dividend payments and strategic financial management, the company provides investors with stability and growth prospects. Utilizing options strategies to lower buy-in costs further enhances the investment proposition, making Lockheed Martin a compelling choice for long-term investors.
Featured Image: Megapixl
Author Faith Yakubu 
