Playing Defensive With Industrial and Defense Dividend Players (LMT, EMR, GD, MMM, HON)

When economic softness spooks high-flying stocks, solid companies with good histories, solid return on equity, and above average dividends are a handy remedy.  We screened five companies in the industrial sector, three of them in Aerospace/Defense, that may suit the investor seeking current income and a tad more safety.  The dividends for all five of the companies range from about 2.3% to 3.9%. All have good liquidity, attractive fundamentals and positive annual earnings growth.  The current P/E’s for all five companies range from 10.2 to 20.09.  Forward P/E’s range 9.0 to 13.3.  The lowest return on equity (ROE) is a very attractive 19.86%.

Lockheed Martin Corporation (NYSE: LMT) is the leading dividend payer on this list with almost 3.9% dividend payout and a payout ratio of 37.5%. Lockheed boasts a whopping return on equity of 68%, easily the highest on this list per our screening criteria.  With shares currently trading around $77.50, the 52-week range is $67.68 to $82.43.

Emerson Electric Co. (NYSE: EMR) pays a dividend of 2.7%.  Emerson’s quarter-over-quarter earnings growth is 36.25%, second only to Honeywell (HON) in this group of companies that were screened.  With shares trading near $51.50, the 52-week range is $42.69 to $62.24.

General Dynamics Corp. (NYSE: GD) pays a 2.6% dividend. With a payout ratio of 24.5%, the company boasts the best dividend coverage in this group. Its year-over-year earnings growth of 9.9% is the lowest among these five companies.  Its forward P/E of about 9.2 is also near the lowest. With shares currently trading around $71, the 52-week range is $55.46 to $78.27.

3M Co. (NYSE: MMM) pays a dividend of 2.4% and the company’s return on equity is above 28%.  Its year-over-year earnings growth is 24.6%. With shares trading around $91.50, the 52-week range is $72.72 to $97.95.

Honeywell International Inc. (NYSE: HON) pays a dividend of 2.3%. Honeywell’s  annual earnings growth is 26.4% and quarterly earnings growth of almost 39.5% leads this group of companies.  With shares currently near $57, the 52-week range is $37.68 to $62.28.

Investors generally tend to migrate to dividend stocks and there is good news on all of these.  These companies have all raised dividends recently or are anticipated to raise their dividends this year or next.

Jim Berdou