Lockheed Martin Is Down 15%. Is Its 22-Year Dividend Safe?

Lockheed Martin is one of those names that shows up on every "safe defensive dividend" list, and right now it's a tempting way to ask the question. The stock sits around $536, roughly 15% below where it traded this past spring, and it pays a quarterly dividend of $3.45 a share that has been raised every single year for 22 straight years. The yield is a modest 2.5%. The real question isn't whether the price is falling — it's whether the cash that produces that check is still working.

First, what the dividend actually is

Start with the part that's already in the bag. Lockheed declares $3.45 a share four times a year — $13.80 in 2026 — and it has increased that number every year for 22 consecutive years, all the way from $2.64 a share in 2010. That's the difference between a dividend and a dividend: one is a line on a screen, the other is a streak you can count.

It's worth being clear about what you're not buying. At 2.5%, this is not a yield grabber. You are not getting paid 8% for taking on risk. You're getting paid a modest, growing income that has compounded upward for two decades. If your goal is the highest check you can find today, this isn't it. If your goal is income you can build a budget around — and keep getting a little more of each year — that's the whole point of a name like this.

What actually produces the check

A dividend is only as safe as the cash behind it, so let's follow the money. Lockheed builds jets, missiles, satellites, and spacecraft, and it sells most of them to the U.S. government. That customer base sounds like a risk — and it is, more on that below — but it also means the work is booked well in advance.

At the end of its most recent quarter, Lockheed's backlog — the value of contracts it has already won and still has to deliver — hit a record $230 billion, up from $194 billion at the end of 2025. That jump was driven by a $35 billion multiyear contract to build THAAD missile interceptors, on top of $65 billion in new orders in just that one quarter. Backlog is like a down-payment from the future: revenue you don't have to chase.

And the backlog is turning into cash. Management guides for roughly $7 billion in free cash flow this year — the money left over after it runs the business and reinvests in new programs. Its annual dividend, about $3.2 billion, is covered a little more than twice by that figure, and the payout works out to roughly 46% of the $30.30 in earnings it guides for the year. In plain terms: Lockheed keeps about half its profit for itself and pays you the other half, and the free cash flow swallows the dividend with room to spare.

That's the number that answers "safe." The dividend isn't being paid out of borrowed money or sold-off assets. It's being paid out of a backlog and a cash flow that covers it more than twice over.

Why the price fell, and what it didn't

Here's where the story gets interesting, because the price and the payout are telling two different stories.

The stumble started in the spring. Lockheed's first quarter missed estimates, its free cash flow briefly went negative, and the sector wobbled as hopes for a bigger fight cooled — the stock dropped 14% in April alone. Then in June, a U.S.-Iran peace agreement rattled the whole defense group as money rotated elsewhere.

The quarter in between was genuinely strong. In late July, Lockheed reported second-quarter results that beat expectations — revenue up 10.5% to $20.1 billion — and it raised its full-year guidance across revenue, profit, and cash flow. The stock popped 5% on the news. And yet it's since given most of that back, falling about 11% over the past three weeks.

That's the tell. The business just delivered a record backlog, lifted its cash-flow guidance, and covered its dividend twice over. The price fell because the mood in defense stocks turned — de-escalation, rotation, the ordinary give-back after a run — not because the payout engine changed. For an income investor, that distinction is everything. When the income stream is intact, a lower price means you can buy the same dependable check for less money. The volatility is, in that case, feeding your reinvestment rather than breaking your income.

One honest caveat on the earnings side: 2025 absorbed a $1.6 billion hit from program cost overruns that depressed that year's per-share results. That's the reminder that a defense contractor's profit can wobble with a troubled program — even when the dividend doesn't.

Where it can genuinely hurt

The income case is solid, but "safe" is not "risk-free," and the risks here are specific.

The biggest is the customer. The U.S. Department of Defense is the majority of Lockheed's business, and defense budgets are a political decision, not a law of physics. The large spending increases people talk about are proposals, not enacted policy. A sustained, real cut to the budget — or a government standoff — would pressure the backlog and, eventually, the cash. That's the variable that would actually change this dividend's math.

The second is program cost. The 2025 losses show a bad program can dent earnings. And the balance sheet carries real leverage, roughly $54 billion in total debt. None of that threatens a dividend that free cash flow covers more than twice over. But it's why the stock trades at about 20 times its trailing earnings and about 18 times the earnings it guides for the year — a reasonable multiple for a company carrying a record backlog and a growing check, not a bargain-bin special.

The portfolio job

So what does Lockheed Martin do in a portfolio? It's the defensive income anchor — a bond-like, growing dividend backed by government contracts, not a yield chaser and not a growth stock. Its job is to keep paying and slowly paying more, so a bad year in your portfolio doesn't force you to sell anything to cover the bills.

You don't buy it as the whole plan — one name is a holding, not a yield machine, and it still carries concentrated, political risk. You buy it for the job a stable, rising dividend does inside a broader set of income holdings. And if the income engine is the reason you own it, "is it safe to buy now" mostly reduces to this: the check is still intact and still covered, the price is softer than the spring, and the one thing worth actually watching is whether the government keeps writing those checks to Lockheed in the first place.