Lockheed Martin Keeps Raising Its Dividend as Pentagon Money Keeps Flowing
Lockheed Martin has raised its dividend for 23 straight years on the strength of a single customer, but two recent quarters exposed just how quickly that cash cushion can vanish when fixed-price contracts go wrong.
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Retirees who hold Lockheed Martin (NYSE:LMT | LMT Price Prediction) for income own a payout funded largely by one customer: the U.S. government. That customer explains why the dividend has grow for 23 consecutive years. It also explains why one weak quarter in 2026 showed how thin the cash buffer can get.
Backlog Is the Real Coverage Ratio
A funded backlog that runs for years supports a dividend more reliably than demand that has to be won again every quarter. Lockheed ended Q2 2026 with a record backlog of $230.42 billion after booking $65 billion in new orders. The largest was a $35 billion multi-year THAAD interceptor contract. That backlog covers about 3.07 years of 2025 revenue, which was $75.05 billion. On the Q2 call, the CFO put it simply:
“This deep book of contracts will fuel our sales growth for years to come.”
The cash backs that up. In 2025, free cash flow (the cash left after capital spending) reached $6.91 billion, while dividends cost $3.131 billion. That covered the payout about 2.2 times. Lockheed then raised its 2026 free cash flow guidance to $7.0B to $7.2B.
Q1 2026 Showed How Fast the Cash Can Disappear
Free cash flow came in at negative $291 million in Q1 2026, yet Lockheed still paid $816 million in dividends. The quarter carried $125 million in unfavorable F-16 profit adjustments, plus charges on the C-130, CH-53K and Seahawk programs. The same thing happened in Q2 2025: operating cash flow of $201 million fell short of $771 million in dividends after $1.6 billion in losses on fixed-price programs, where Lockheed bears any cost overruns. The chief executive now says that kind of risk is over:
“We’re not doing that anymore. We’re not taking that kind of risk without a counterparty that’s willing to work on a commercial basis right along with us.”
Budget Fights Leave Gaps in the Forecast
Lockheed’s 2026 outlook “does not include potential impacts of government shutdown or Executive Orders.” Its filings also flag continuing resolutions, the temporary bills that keep spending flat when Congress misses a budget. Even F-35 volumes still have to get through Congress:
“Now, Congress has to work with the administration to figure out how to budget and fund that.”
Where RTX and Northrop Grumman Stand
RTX (NYSE:RTX) has a second source of cash. Of its $271 billion backlog at Q1 2026, $162 billion was commercial aerospace work. Northrop Grumman (NYSE:NOC) has the same exposure Lockheed does: a $104.69 billion backlog and guidance that assumes no extended shutdown. Lockheed’s backlog is more than double Northrop’s, but it lacks the commercial buffer RTX has.
Where the Dividend Goes From Here
Relying on one customer helps the dividend over a span of years and hurts it from quarter to quarter. The payout kept growing through two quarters when operating cash fell short of it. The bigger risk is new fixed-price losses arriving while Lockheed spends eight to nine billion dollars to expand munitions production (the warning signs that usually come before a dividend cut are the same ones we catalogued in a free report here: Dividend Traps).
The stock yields 2.68% at $505.47. The quarterly dividend has held at $3.45 since the last increase was declared on October 9, 2025, so the next decision on a raise could come within weeks. Two other things to watch: the multi-year PAC-3 contract management expects in the second half of 2026, and whether Q3 cash flow holds up after Q2’s boost from favorable timing of customer payments.
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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.
