GD vs. LMT: Which Defense Dividend Stock Will Crush Retirement Income Goals?
Two battered defense giants, record backlogs, and sharply cheaper entry prices are tempting retirement income investors, but only one of these dividend payers has the cash flow history to keep the checks coming without drama.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
General Dynamics (NYSE:GD | GD Price Prediction) or Lockheed Martin (NYSE:LMT): which defense prime deserves a spot in a retirement income portfolio right now? The question got sharper this month. General Dynamics fell 11.86% over the past month to $336.69. Lockheed slid 7.56% to $519.49. Income buyers now get cheaper entry points on two companies sitting on record backlogs.
Yield and Payout Safety: General Dynamics Wins on Coverage
Lockheed pays more to own. Its annualized forward dividend of $13.8 per share comes with a 2.61% yield. General Dynamics offers an annualized forward dividend of $6.36 against its share price, a smaller stream per dollar invested.
That extra yield carries extra risk. Lockheed’s free cash flow turned negative at -$291M in Q1 2026, the same quarter it paid $816M in dividends. Cash recovered to $2.917B in Q2, with full-year free cash flow guidance at $7.0B to $7.2B alongside EPS guidance of $29.95 to $30.65. Still, a payout carried across a negative cash quarter is a weaker payout.
General Dynamics covered $1.593B of 2025 dividends with $3.959B of free cash flow. Management expects 2026 free cash flow conversion of “around 105%” of net income, net debt fell to $3.2 billion, and adjusted EPS guidance rose to $16.80 to $16.90.
Dividend Growth and Track Record: Lockheed Wins on Raise Momentum
Lockheed’s Q4 2025 hike of 5% to $3.45 quarterly marked its 23rd consecutive year of increases. The payment history backs the climb: $1 per quarter in 2012, $3.3 in 2025, and $3.45 today. One note: the record shows the payout dropping from $0.22 in 1999 to $0.11 from 2000 through 2002, so the streak dates from that cut.
General Dynamics’ record runs back to a $0.22 quarterly payment in 1999, with a steady recent pattern: $1.42, then $1.5, now $1.59. Starting from $0.51 in 2012, it trails Lockheed’s dollar growth. Lockheed also added $3.0B of 2025 buybacks on top, versus $637M at General Dynamics.
Business Durability: General Dynamics Wins on Diversification
Lockheed’s backlog is bigger: a record $230.42B, lifted by a $35B THAAD interceptor contract. Its revenue base is narrower. Aeronautics, home of the F-35, generated $8.112B of $20.063B in Q2 sales, and the company relies on U.S. government contracts. 2025 brought reach-forward losses of $950M on classified Aeronautics work plus $570M and $95M at Rotary and Mission Systems. Q1 2026 added $125M of F-16 adjustments and charges on C-130, CH-53K and Seahawk. Management now promises discipline: “We don’t plan to ever put ourselves in a risk position where we don’t have that confidence in the contract that we didn’t have for the C-130. We’re not doing that anymore.”
General Dynamics spreads $14.09B of quarterly revenue across Marine Systems ($4.66B), Technologies ($3.619B), Aerospace ($3.525B) and Combat Systems ($2.29B). Gulfstream brings corporate customers outside the Pentagon budget. Backlog hit a record $136.5 billion, up 32%, on 1.4x book-to-bill. The soft spot: Combat Systems grew only 0.3%.
Verdict: General Dynamics Is the Retirement Income Pick
For an investor at or near retirement, General Dynamics wins. Its payout rests on free cash flow that well exceeds dividends, a shrinking debt load, and four revenue sources with no history of recent large program charges. A retiree drawing income needs the check to arrive without drama, and General Dynamics has the cleaner cash record.
Lockheed’s case is real. It offers the higher yield, a documented raise streak, a forward P/E of 16, and an analyst target of $637.84. It fits a younger income investor with years of runway who wants maximum cash today and can absorb earnings swings.
The condition that flips this verdict: if Lockheed delivers 2026 free cash flow inside its $7.0B to $7.2B guidance with no new reach-forward losses through year-end, its yield edge becomes the better deal for retirees too. Lockheed’s next earnings report should offer that proof.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
