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The five dividend-paying space stocks to buy are recommended by seasoned industry observers who are forecasting increased space and satellite missions taking flight. As wars rage in Ukraine, Gaza and elsewhere on Earth, demand is rising for companies engaged in commercial ventures, along with the U.S. military and its allies.
The five space stocks to buy are benefiting from soaring demand for launch and satellite services. All five have tailwinds to motor forward. A key catalyst comes from increased military demand by the U.S. Department of Defense and countries in the North Atlantic Treaty Organization (NATO) amid Russia's continuing invasion of Ukraine that began on February 24, 2022.
The result is a recovery in the commercial space business that appears strong enough to overcome economic uncertainty, according to BofA Global Research. Defense spending, in particular, also is on the ascent amid mounting geopolitical security risks, BofA added.
U.S. Defense Strategy Fuels Growth
U.S. National Defense Strategy addresses the need to use deterrence as a primary way to protect the homeland and modernize military preparedness, wrote Jason Gursky, an aerospace and defense analyst with Citigroup. The U.S. government thereby is investing in its nuclear defense capabilities, as well as conventional military planes, ships and tanks, he added.
In addition, the U.S. Department of Defense is investing in an initiative called Joint All-Domain Command and Control – whose primary mission is to reduce timelines between "sensors and shooters" to provide further "deterrence and tactical advantage," Gursky wrote in a recent research note.
"This is being done through the proliferation of sensors across the space, land, air and sea domains and the ability to quickly analyze vast amounts of data using AI," Gursky continued. "In our view, investments in this initiative support higher defense spending through the end of the decade, and that a rising tide will lift all boats – with most contractors benefiting from it."
Five Dividend-paying Space Stocks to Buy: Honeywell (NYSE: HON)
Several companies involved heavily in the space business have received "buy" recommendations from Citigroup. One of them is Honeywell International Inc. (NASDAQ: HON), a Charlotte, North Carolina-based manufacturer of aerospace and automotive products; residential, commercial and industrial control systems; specialty chemicals and plastics; and engineered materials.
The company announced a $1.9 billion acquisition of CAES Systems Holdings LLC (CAES) from private equity firm Advent International on June 28 to enhance its defense technologies in space, air, land and sea. CAES' high-reliability radio frequency technologies have the potential to help Honeywell drive long-term growth and further diversify revenue streams in the defense industry.
Honeywell is a current profitable recommendation in the Flying Five portfolio of the Forecasts & Strategies investment newsletter led by Mark Skousen, PhD, an economist who serves as a Presidential Fellow at Chapman University. The Flying Five stocks are Skousen's choice among the five high-dividend-paying Dow stocks with the lowest prices. He has been recommending a Flying Five each year since the early 1990s, and those stocks typically outperform the market.
Ben Franklin scion Mark Skousen, head of Forecasts & Strategies, talks to Paul Dykewicz.
Honeywell has a long tradition as a space company that includes serving NASA with the Appolo moon landing missions. In fact, roughly 1,000 satellites, or 80% of those currently in orbit, have Honeywell components on board, according to the company.
Citigroup rates Honeywell as a "buy" due to a solid long-term earnings per share (EPS) growth potential despite an uncertain macro environment. Short-cycle weakness should ease over time and longer-cycle end markets, particularly aerospace, could stay resilient and let the company remain well positioned in secular growth market such as automation and digitalization, Citigroup wrote in a recent research note.
Plus, recent structural cost actions could drive better-than-expected operating leverage in a growth environment, Citigroup continued. Finally, accelerated cash deployment and an under-levered balance sheet with good cash flow could spur further upside over time, Citigroup concluded.
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Booz Allen Hamilton (NYSE: BAH), a McLean, Virginia-based recommendation from the Chicago-based investment firm William Blair, has advanced after reporting fourth-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) above consensus analysts' estimates during late May. The dividend-paying defense stock's management issued its fiscal 2025 guidance above consensus on the strength of its pipeline of opportunities and hiring trends offset by potential election and geopolitical disruptions.
Booz Allen's artificial intelligence (AI) and machine learning (ML) Databricks partnership for the Advana platform has been a major growth driver, wrote Louie DiPalma, a William Blair aerospace and defense analyst. The industry continues to benefit from a strong 2023 defense budget, a favorable hiring environment and wage inflation, he added.
"Headcount trends and strong bookings will likely continue to be the main drivers of revenue growth, and both are in the firm's favor," DiPalma continued. "Over the past few years, Booz Allen has won elite contracts for cybersecurity (Thunderdome, CDM DEFEND, CyPrESS), data analytics (Advana, CDC DMA), artificial intelligence (EMAPS, the JAIC, Space Force remote sensing), and augmented reality (Army digital soldier, soldier as a service). We view the stock as artificial intelligence at a reasonable price (AARP) and see upside of greater than 15% over the next year."
Chart courtesy of www.stockcharts.com
Booz Allen Hamilton Has Additional Backers
Another fan of Booz Allen Hamilton is Jim Woods, a former Army paratrooper who has recommended the company profitably in the past. Woods has a big defense contractor in the Income Multipliers portfolio of his Successful Investing newsletter but he also likes Booz Allen Hamilton.
Jim Woods leads Successful Investing and co-heads Fast Money Alert.
As a former military man, Woods has a keen interest in defense and cyberspace, following them closely for subscribers of his Successful Investing newsletter and his trading services such as Bullseye Stock Trader, High Velocity Options and Fast Money Alert. The latter service he co-heads with Mark Skousen, PhD, who also leads the Forecasts & Strategies investment newsletter.
Booz Is a Bullseye for Woods
Subscribers of Bullseye Stock Trader collected a profit of 21.67% in 2019 when Woods recommended the stock for slightly more than three months. He also recommended related call options in Bullseye Stock Trader that produced a profit of 166.67%.
Fast Money Alert subscribers gained 9.59% after only about a month late in 2022 with a follow-up recommendation of Booz Allen Hamilton. A related call option recommendation in Fast Money Alert for Booz Allen Hamilton produced a 239.27% profit in less than one month.
Bryan Perry, who leads the Cash Machine investment newsletter, generated a 25% gain for his subscribers in the Breakout Options Alert advisory service in less than three weeks last May.
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Michelle Connell, owner and president of Dallas-based Portia Capital Management LLC, is yet another fan of Booz Allen Hamilton. Focused on wealth management for private investors and non-profit institutions, Connell advised that the company has "robust fundamentals" and has generated more than a half billion dollars in free cash flow every year for the last 10 years. Its return on equity is well over 50%, she added.
Plus, the company's revenue growth is in excess of 15% a year. Expect this to increase given the demand for AI-related consulting services, Connell continued.
The stock's dividend yield of 1.28% likely will increase, given the amount of demand for AI ,as well as its strong free cash flow, she added. Plus, there is no short interest in the stock, adding that means no one is willing to go against BAH and its stock performance, Connell concluded.
Michelle Connell leads Dallas-based Portia Capital Management.
Five Dividend-paying Space Stocks to Buy: Lockheed Martin (NYSE: LMT)
Lockheed Martin (NYSE: LMT), a Bethesda, Maryland-based aerospace and defense company, recently received a 12-month price target of $525 and a buy recommendation from Citigroup. The company is a combination of a 1995 merger between Lockheed Corporation and Martin Marietta Materials, Inc.
In its enlarged form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. The company operates the key business segments such as Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
Management recently gave guidance that margins are likely to trough in 2024 and head toward 11%-plus over time, driven largely by product mix, Citigroup wrote in a recent research note. The loss-making classified contract at Lockheed Martin's MFC business will be a tailwind in 2025, i.e., lower forward loss charges, while the rest of the margin accretive MFC portfolio is likely to grow faster than the remainder of the company. Further, new awards across the company face the current cost environment and should produce margins higher than pre-pandemic backlog, according to the Citigroup research note.
Lockheed Martin recently announced it awarded privately held Firefly Aerospace a contract for 15 launches, including options for 10 additional ones in the future. Firefly's Alpha rocket is in a unique position with 1,000 KG of payload capacity, offering much more than Rocket Lab (NASDAQ: RKLB). Industry launch giant SpaceX has much more capacity, leaving a niche for Firefly to meet the needs of big defense contractors like Lockheed Martin for certain missions, Citigroup's aerospace analyst Gursky wrote.
Chart courtesy of www.stockcharts.com
Five Dividend-paying Space Stocks to Buy: SAIC
Reston, Virginia-based Science Applications International Corp. (NASDAQ: SAIC) provides defense, space, civilian and intelligence markets services to the U.S. government to produce $7.2 billion in annual revenues. The government contracts give SAIC a stable, recurring revenue base, significant margin expansion opportunities and a strong cash flow.
SAIC also has a history of creating shareholder value through dividend payouts, share repurchases and acquisitions. The company furhter is carving out a role in artificial intelligence by recently launching Tenjin GPT, a new internal, generative artificial intelligence (AI) resource. The capability is aimed at harnessing cutting-edge AI capabilities to automate and optimize business processes.
Tenjin GPT is an example of using technological innovation to provide real-time insights and data analysis, enhancing creativity and collaboration. In addition, Tenjin GPT is the latest feature of SAIC's data science platform, leveraging the power of OpenAI's GPT to give users access to the latest advancement in natural language processing.
The state-of-the-art AI model enables users to develop sophisticated applications, to automate repetitive tasks, to streamline processes and to gain insights from data. Powered by Microsoft's Azure AI, the framework is intended to ensure seamless integration and scalability.
SAIC offers solutions in mission intellectual technology (IT), enterprise IT, engineering services and professional services. The company aims to integrate emerging technology into mission critical operations to modernize and enable critical national imperatives.
Also in May, the company won a $232 million contract to develop intelligence and electronic warfare systems for the U.S. Army. The contract is part of the Department of Defense Information Analysis Center's (DoD IAC) multiple-award contract (MAC) vehicle. These DoD IAC MAC task orders (TOs) are awarded by the U.S. Air Force's 774th Enterprise Sourcing Squadron to develop and create new knowledge to enhance the DTIC repository and the research and development (R&D) and science and technology (S&T) community.
Chart courtesy of www.stockcharts.com
Five Dividend-paying Space Stocks to Buy: General Dynamics
General Dynamics (NYSE: GD), headquartered in Falls Church, Virginia, provides land combat vehicles, weapons systems and munitions, ship construction and repair, and technology products and services. In addition, General Dynamics is a leader in the business aviation industry through its Gulfstream and Jet Aviation subsidiaries. Overall, General Dynamics operates in four main segments: Combat Systems, Aerospace, Marine Systems and Technologies.
The company notched an overall operating margin of 11.0%, with margins of 15% in Aerospace, 14.4% from Combat Systems, 9.5% with Technologies and 7.6% by Marine Systems. Citigroup rates shares of General Dynamics as a "Buy."
The investment bank recommends building positions in the company due to:
1) An Aerospace segment growth outlook lifted by recent order trends and a backlog that gives earnings upside for the next several years;
2) Marine segment growth prospects and improved margins as the company's labor force and supply chain normalize post-pandemic;
3) Rising demand for the Combat Systems segment as the United States and its NATO allies prepare plans for increased military spending to deter further land-based conflicts in Europe; and
4) Increasing valuation for defense prime contractors.
Chart courtesy of www.stockcharts.com
Five Dividend-paying Space Stocks to Buy as Geopolitical Risk Mounts
An enhanced alliance between Russia and North Korea is adding additional risk to the ongoing wars in the world. Experts speculate China's leaders likely are worried about a potential loss of influence over North Korea after its leader Kim Jong Un and Russian President Vladimir Putin signed a pact this week, according to the Associated Press.
The alliance not only will give Russia additional access to arms and military equipment as it continues its invasion of Ukraine, but it could increase instability on the Korean Peninsula. China's leaders now face what could be the strongest Russia-North Korea partnership since the Cold War.
The increased drama comes as the Middle Eastern conflict in Gaza between Israel and Hama shows no end in sight, while Russia keeps trying to gain further ground in Ukraine. To aid in Ukraine's defense against Russia's unrelenting attack, Western governments have been supplying additional arms and equipment, as well as allowing some of it to be used against military targets that previously had been declared off-limits.
The five dividend-paying space stocks to buy as launches multiply are benefiting from strong demand to put both commercial and military spacecraft in orbit. Investors who aim for share price appreciation and income increasingly have been able to find it from space stocks that provide launch services and support satellite communications services. | | | Sincerely,
Paul Dykewicz, Editor
DividendInvestor.com
| | About Paul Dykewicz: Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul also is the author of an inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain", with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz. | | | | | |
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