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Mega-Cap Defense Stocks Cheap as Russia-Ukraine War Demand Skyrockets: 5 'Strong Buy' Dividend Picks to Buy Now
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No matter what period in history you look at, there is almost always some sort of global conflict. While nobody wants to see protracted and deadly wars, most major countries have adopted a peace through strength posture. For investors looking for sectors to shift to as the AI rally runs its course, it always makes sense to have positions in the defense and aerospace arena.
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While many hope for one, there seems to be no end in sight to the Russia-Ukraine struggle. Add in ongoing tensions with China, especially concerning Taiwan, and global hot spots continue to pop up in places like the Middle East. Unfortunately, demand for products from the top defense companies remains strong.
We decided to screen our 24/7 Wall Street defense and aerospace research universe looking for the highest dividend-paying stocks that are Buy rated on Wall Street. Five top companies hit all the metrics we were looking for. However, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
General Dynamics
Like other major defense contractors, General Dynamics Corp. (NYSE: GD) has had a solid year. This global aerospace and defense company operates through the following four segments.
The Aerospace segment produces and sells business jets, and it offers aircraft maintenance and repair, management, aircraft-on-ground support and completion, charter, staffing and fixed-base operator services.
The Marine Systems segment designs and builds nuclear-powered submarines, surface combatants and auxiliary ships for the United States Navy and Jones Act ships for commercial customers. It also builds crude oil and product tankers and container and cargo ships; provides maintenance, modernization and lifecycle support services for navy ships; and offers and program management, planning, engineering and design support services for submarine construction programs.
The Combat Systems segment manufactures land combat solutions, such as wheeled and tracked combat vehicles, Stryker wheeled combat vehicles, piranha vehicles, weapons systems, munitions, mobile bridge systems with payloads, tactical vehicles, main battle tanks, armored vehicles and armaments. It offers modernization programs, engineering, support and sustainment services.
The Technologies segment provides information technology (IT) solutions and mission support services; mobile communication, computers and command-and-control mission systems; intelligence, surveillance and reconnaissance solutions to military, intelligence and federal civilian customers; cloud computing, artificial intelligence, machine learning and big data analytics; development, security and operations; and unmanned undersea vehicle manufacturing and assembly services.
Shareholders receive a 2.57% dividend. Royal Bank of Canada has a $270 target price on General Dynamics stock. The consensus target is $261.22, and shares closed on Tuesday at $210.81.
Lockheed Martin
This remains a top aerospace and defense stock to buy, as many on Wall Street expect a continuation of U.S. and foreign defense spending, Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. It also provides a wide range of defense electronics products and IT services.
Being the Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from many foreign allies of the nation.
Investors receive a 2.67% dividend. Citigroup’s target price is $579, while Lockheed Martin stock has a $506.35 consensus target. The shares closed on Tuesday at $458.63.
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L3 Harris Technologies
This off-the-radar giant may be the best total return candidate of all these top companies. L3 Harris Technologies Inc. (NYSE: LHX) is an aerospace and defense technology company that provides mission-critical solutions for government and commercial customers worldwide.
The company’s Integrated Mission Systems segment provides multi-mission intelligence, surveillance and reconnaissance (ISR) systems, and communication systems, as well as fleet management support, sensor development, modification and periodic depot maintenance services for ISR and airborne missions.
This segment also manufactures and integrates mission systems for maritime platforms, such as signals intelligence and multi-intelligence platforms; unmanned surface and undersea autonomous solutions; and power and platform control systems and other electronic and electrical products and systems. It also offers advanced electro-optical and infrared solutions.
The Space and Airborne Systems segment offers space payloads, sensors and full-mission solutions; classified intelligence and cyber defense solutions; mission avionics; and electronic warfare systems.
The Communication Systems segment provides broadband communications; tactical radios, software-defined radios for key Defense Department network modernization programs and satellite communication terminals, and battlefield management networks for U.S. and international defense customers; integrated vision solutions, including helmet-mounted integrated night vision goggles; heads-up displays along with Clip-on Weapon Sights, and weapon-mounted aiming lasers and range finders; and public safety radios and system applications and equipment.
L3 Harris Technologies stock comes with a 2.50% dividend. Morgan Stanley’s $264 target price compares with a consensus target of $236.35 and Tuesday’s close at $184.52.
24/7 Wall St.Northrop Grumman
This was ranked as one of the top five defense contractors by sales last year, and it is on the BofA Securities US 1 list of top stock picks. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide.
The Aerospace Systems segment designs, develops, integrates and produces crewed aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.
The Information Systems segment offers advanced solutions for the Defense Department, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.
Northrop’s Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.
The dividend yield here is 1.68%. The $655 BofA price objective is well above the $513.18 consensus target, and Northrop Grumman stock ended Tuesday trading at $448.10.
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Raytheon Technologies
This company has a diversified mix of business and remains another favorite across Wall Street. Raytheon Technologies Corp. (NYSE: RTX) is an aerospace and defense company that provides systems and services for the commercial, military and government customers worldwide.
Its Collins Aerospace Systems segment offers aerospace and defense products and aftermarket service solutions for aircraft manufacturers and airlines, as well as regional, business and general aviation and for defense and commercial space operations.
This segment also designs, produces and supports cabin interior, oxygen systems, food and beverage preparation, storage and galley systems and lavatory and wastewater management systems; airborne intelligence, surveillance and reconnaissance systems, test and training range systems, crew escape systems and simulation and training solutions; information management services; and aftermarket services that include spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions and asset management services.
The Pratt & Whitney segment supplies aircraft engines for commercial, military, business jet and general aviation customers. It also produces, sells and services military and commercial auxiliary power units.
The Raytheon Intelligence & Space segment develops and provides integrated space, communication, and sensor systems and cyber and software solutions to intelligence, defense, federal and commercial customers.
And the Raytheon Missiles & Defense segment provides end-to-end solutions for U.S. and foreign government customers designed to detect, track and engage threats.
Shareholders receive a 2.46% dividend. Raytheon Technologies stock has a $117 target price at Wolfe Research. The consensus target is $109.75, and shares closed at $97.44 on Tuesday.
The Russian-Ukraine conflict is filling the coffers of these top companies, and really putting a dent in their inventory levels. While good for investors, many feel that our own armed forces may struggle and be short of weapons and ammunition if we were thrust into yet another major conflict now.
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