Lockheed Martin: A Top Defense Pick in 2025

Key Points

• Lockheed Martin demonstrates financial stability and a strong outlook, supported by a significant backlog of orders and consistent earnings performance.
• The company maintains a strong commitment to returning value to shareholders through a reliably growing dividend, marking over two decades of consecutive increases.
• Increased global defense spending and ongoing innovation in advanced technologies present substantial growth opportunities for the company across its diverse business segments.

Ongoing geopolitical instability and numerous regional conflicts are creating a climate of investor caution in the current global landscape. This prolonged uncertainty has a direct and significant consequence: a notable and accelerating rise in global military expenditures.

Reports from the Stockholm Institute for Peace Research indicate global military spending reached approximately $2.7 trillion in 2024, a 9.4% increase from the previous year. This marks one of the steepest annual climbs in recent decades. In this environment, the aerospace and defense sector has become a prominent area of interest for investors seeking resilience and potential upside.

This heightened focus is reflected in the performance of sector-specific exchange-traded funds (ETFs). For instance, the iShares U.S. Aerospace & Defense ETF BATS: ITA has demonstrated a year-to-date Net Asset Value (NAV) total return of approximately 15% as of mid-May 2025. This performance is indicative of the strong investor appetite for defense-related investments.

Within this trend, established defense contractors are drawing particular attention. Lockheed Martin NYSE: LMT, a leading name in the industry, currently finds itself under careful consideration by market participants. The company has recently appeared on multiple watchlists designed to signal active investor engagement and positive developments.

This backdrop sets the stage for a closer look at Lockheed Martin's attributes as a potential investment that may offer both capital preservation and long-term upside.

Lockheed Martin: More Than Munitions

Lockheed Martin is one of the largest global security and aerospace corporations. It operates across the Aerospace, Missiles and Fire Control, Rotary and Mission Systems, and Space segments. Its products and services are crucial for national and international defense, and its business model is firmly anchored by long-term government contracts that offer investors revenue predictability.

This stability often attracts investors seeking "safe harbor" investments, especially during volatile markets. Unlike many consumer-driven industries, the demand for major defense contractors like Lockheed Martin is primarily driven by national security needs, resulting in less correlation with general economic cycles.

Lockheed Martin: Financial Fortitude and an Income Stream

Lockheed Martin’s first-quarter 2025 results underscored its operational resilience, with sales reaching $18.0 billion and diluted earnings per share (EPS) reported at $7.28, a figure that surpassed analyst consensus estimates.

Management reaffirmed its full-year 2025 financial outlook, signaling continued confidence in performance. A critical indicator of this stability is its substantial order backlog, which stood at an impressive $173.0 billion as of March 30, 2025, offering significant visibility into future income streams.

The company recently declared a second-quarter 2025 dividend of $3.30 per share, continuing a 22-year history of consecutive dividend increases. A stock price of approximately $448 (as of mid-May 2025) translates to an annualized dividend yield of around 2.95%. This consistent and growing dividend stream is a cornerstone of Lockheed Martin’s investment appeal for income-focused investors.

Fueling Lockheed Martin’s Forward Momentum

While stability is a key draw, Lockheed Martin also presents avenues for growth, positioning it to capitalize on the expanding global defense market. A pivotal program, the F-35 Lightning II, continues to be a significant revenue driver, and recent commentary from Lockheed Martin's CFO indicated an anticipation of an earlier-than-expected contract award for Lots 18 and 19 of the fighter jet.

The company is also investing in next-generation capabilities, including hypersonics, artificial intelligence (AI) in defense, advanced cybersecurity solutions, and cutting-edge space systems. These investments aim to secure Lockheed’s technological leadership and address evolving global threats.

Recent significant contract wins—such as for Precision Strike Missiles, THAAD, JASSM, LRASM, and the Trident II D5 Life Extension program—underscore strong demand for its advanced offerings.

Weighing Expert Opinions on Lockheed Martin

As of mid-May 2025, Lockheed Martin's stock was trading at approximately $448.19, toward the lower end of its 52-week range of $418.88 to $618.95.

This could represent an appealing entry opportunity for long-term investors.

The consensus analyst rating for Lockheed Martin is Moderate Buy with an average price target of $541.80, indicating meaningful upside potential.

However, recent analyst sentiment has been mixed, with some raising ratings and others maintaining Hold or Neutral stances.

Despite this, Lockheed Martin has delivered strong long-term performance, with returns exceeding 25% over five years and nearly 230% over the last ten.

Lockheed Martin: A Strategic Asset for Investor Portfolios

The persistent undercurrent of global geopolitical tensions underscores the strategic importance of the defense sector. Lockheed Martin stands out with a substantial backlog, consistent dividend growth, and a key role in global security.

While dependence on government budgets, program complexities, and competition are important factors to consider, Lockheed Martin's current strength and forward-looking investments create a compelling investment profile. For investors seeking stability combined with growth potential, Lockheed Martin merits consideration as a core holding in a diversified portfolio.