Three Dividend-paying Defense Stocks to Purchase With NATO's Funding Hike 07/03/2025 | | | Scan the market, choose your trade, define your risk. Income Machine does the heavy lifting.
Try it here. Click Here... | | | | Three dividend-paying defense stocks to purchase with NATO's funding hike feature two American companies and one from Europe.
The three dividend-paying defense stocks should be aided by NATO's decision to increase spending to 5% of GDP by 2035 for all 32 member countries, with a floor of 3.5% earmarked for "core military needs," more than doubling the previous 2% target set in 2014. The heightened defense spending could become a significant growth driver for many defense companies around the world.
NATO's plan for increased military spending is reminiscent of President Reagan more than doubling the U.S. military budget from below $150 billion in 1980 to $300 billion-plus by 1985. The U.S. government invested heavily in B-1 bombers, missiles and an expanded Navy fleet, as well as launched the Strategic Defense Initiative (SDI), also called "Star Wars" by skeptics, aimed to create a space-based missile defense system.
President Reagan, the 40th president, said that peace needed to be achieved through strength, and history proved him right, wrote Frank Holmes, the CEO and chief investment officer of U.S. Global Investors (NASDAQ: GROW).
Three Dividend-paying Defense Stocks to Purchase With NATO's Funding Hike: History Repeats
The Americans outspent the Soviets and proved to be more innovative… ultimately outlasting them, Holmes continued. President Reagan's strategy played out on the international stage recently at the NATO summit in The Hague.
NATO Secretary-General Mark Rutte praised U.S. President Donald Trump for pushing America's allies to commit to a a boost in spending.
"This would not have happened without Trump," Rutte said.
Trump echoed Reagan's "peace through strength" view by saying it is vital that the additional money be spent on "very serious military hardware," … and hopefully that hardware is going to be made in America because we have the best hardware in the world."
Three Dividend-paying Defense Stocks to Purchase With NATO's Funding Hike: HWM
Howmet Aerospace (NYSE: HWM) is an advanced engineering company in Pittsburgh that is a traditional defense giant, but provides critical components in the F-35 joint strike fighter that hits Mach 1.6 under the thrust of potentially the most advanced engine on earth. The joint strike fighter is built with cutting-edge materials, integrated airframe design and next-generation avionics to enable this fifth-generation fighter jet to operate with potentially unprecedented stealth, speed and agility in air-to-air and air-to-ground combat, company officials said.
In developing the complex fighter jet, Lockheed Martin (NYSE: LMT) turned to Howmet to provide key parts that include single-piece, forged aluminum bulkheads that form the backbone of the aircraft structure and save 300 to 400 pounds per jet, while cutting costs by 20%. The fighter jet also has titanium bulkheads and uses titanium to manufacture other airframe structures for all three F-35 JSF variants. Howmet further supplies single-crystal, nickel-based super alloy blades and vanes that operate in environments hotter than the melting point of the metal to propel the engine.
A seasoned stock picker who likes Howmet Aerospace as a buy recommendation is Jim Woods, who put the stock in his Investing Edge newsletter's Top 10 Growth Accelerators portfolio. Howmet Aerospace is a top-performing pick in the Top 10 Growth Accelerators portfolio of Investing Edge.
Paul Dykewicz meets with Jim Woods, who heads Investing Edge and Bullseye Stock Trader.
Howmet Aerospace is up 65.55% year to date through the close of trading on Thursday, June 3.
Woods also recommended Howmet as a stock in his Bullseye Stock Trader advisory service during February 2025. Despite the market's volatility in recent weeks, both the Howmet stock and call options have been trending positively.
Chart courtesy of www.stockcharts.com
Despite mounting global tensions and conflicts, defense budgets are soaring worldwide. At this time of crises, countries aren't just rearming -- they're digitally fortifying, according to U.S. Global Investors.
President Trump's first overseas trip since returning to office unleashed a tidal wave of economic agreements across the Middle East, U.S. Global Investors wrote in a research note. In just a few days, Saudi Arabia, the UAE and Qatar unveiled plans that could total over $1 trillion in spending, including a historic $142 billion arms deal with the United States, touted as the largest of its kind ever announced | | | All of Donald Trump's policies are public. You read about them every day in the media… he posts what he's thinking and doing on social media many times a day. But what Trump did before leaving office last time could set millions of Americans up for virtually disaster-proof income for as long as they like… and I bet you've never heard about this.
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Get the full story here. Click Here... | | | | Three Dividend-paying Defense Stocks to Purchase With NATO's Funding Hike: LMT
Lockheed Martin (NYSE: LMT), of Bethesda, Maryland, is a defense and aerospace company that resulted from a 1995 combination between Lockheed Corporation and Martin Marietta Materials, Inc. In its current form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. LMT is a Citi Research buy.
The company's key business segments are Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Lockheed Martin's management recently laid out the case that margins are likely to trough in 2024 and drift toward 11%-plus over time, driven largely by product mix.
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 better reflect the current cost environment and should produce margins higher than pre-pandemic backlog, according to a Citi Research note.
Chart courtesy of www.stockcharts.com
"Defense will continue to be a big business," said Michelle Connell, who heads Portia Capital Management in Dallas. Connell is recommending Lockheed as a buy and the President's May 20 announcement about the golden dome is one of her reasons.
According to the Stockholm International Peace Research Institute (SIPRI), 2024 world military expenditures reached $2718 billion. That's an increase of 9.4% from 2023 and the largest year-over-year increase since the end of the Cold War. Military spending is increasing globally, but most especially in Europe and the Middle East.
For context, for the current year, the United States has budgeted $895 billion. Second runner-up is China with $267 billion. Third runner-up is Russia with $126 billion.
Given the above backdrop, investing in the defense sector has a high probability that it will continue to be profitable, Connell said. This year, LMT made it clear that they are going to target increasing their growth in Europe, she added.
"The company is well known for its F-35 aircraft and LMT's management is confident that they will be able to deliver its 2025 goals for this product line," Connell told me. "When Trump signed his recent $142 billion deal with Saudi Arabia, F-35s were not mentioned. It will be interesting to see how this develops."
While LMT recently lost its F47 contract to Boeing, management has stated that they believe that this revenue will be made up elsewhere, Connell said.
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London-based BAE Systems PLC (OTCMKTS: BAESY) is a multinational arms, security and aerospace company that should benefit from NATO nations' commitment to more than double spending in the next decade. Due to Europe's rearmament cycle, Wall Street analysts have lifted their average defense stock target prices by 25%, said Connell, the Chief Investment Officer and owner of Dallas-based Portia Capital Management.
Many European countries have publicly declared their increase in defense spending. Those countries include Denmark, the United Kingdom and Germany.
"Due to a lag in contract negotiations and earnings' revisions, the full potential of these names may not be realized until at least six months from now, Connell continued.
The investment firm JP Morgan wrote in a research note that it expects revenue estimates to increase by at least 10% for these EU defense companies. One of the EU sovereign funds is removing its prohibition of investments in defense companies, Connell commented. A European politician questioned how governments can increase defense spending, but their sovereign funds are not allowed to invest further in these companies.
"In February 2024, BAESY acquired Ball Aerospace to add to its space mission product line," Connell continued. "These synergies should assist BAESY in reaching its 10% sales growth target starting this year."
On July 1, BAESY announced the second tranche of its 1.5 billion pound share buyback. The first tranche, initiated in 2023, totaled 500 million British pounds. The second tranche of 500 million pounds is slated for completion by June 2026. That will leave one additional tranche of 500 million pounds for the future.
"This repurchase program increases BAESY's opportunity for share appreciation," Connell said.
Chart courtesy of www.stockcharts.com
Mounting Geopolitical Risk
The United States is halting shipments of certain weapons to Ukraine amid worries that its own stockpiles have fallen too much, Pentagon officials said Tuesday, July 1. The move is a blow to Ukraine as it seeks to thwart intensifying attacks from Russia.
Some munitions previously were promised to Ukraine by the Biden administration. The timing is bad for Ukraine, with Russia recently launching its biggest aerial attacks since its invasion more than three years ago on February 24, 2022. The fierce bombing campaign further has dimmed the prospects that President Trump's plan to forge peace would succeed quickly upon him taking office on January 20, 2025.
The world also is less than two weeks past the United States bombing three nuclear development sights in Iran in an attempt to thwart progress in enriching uranium that could be used to deploy nuclear weapons. The Republican-led U.S. Senate rejected a Democrat-driven plan to block President Donald Trump from using further military force against Iran, hours after the June 27 remarks of the president that he would not rule out further bombing. The Senate voted 53 to 47 to defeat a war powers resolution that would have required congressional approval for more military action against Iran. | | | 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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