Here’s The Best Space Stock To Buy If You Want Passive Income

0

Let’s put that aside from the start: if you win passive income — paying dividends — is your main investment objective, so investing in the space sector may not be your first choice.

Number of “space stocks“Trading on the stock market has exploded in size during the pandemic, as several so-called ‘new space’ companies have gone public via After-sales operations. This expansion of the range of choices in which to invest may encourage investors to look to the space sector for potential passive income investments.

And yet most of these new space companies – names like rocket lab, Galactic Virgoand Planet Labs — are still in their early growth phase. They have to invest their capital in research and development and sales growth, and they have little money left over for dividend checks.

That being said, there are a few “old space” companies to choose from.

Image source: Getty Images.

Old space, blue chips

Legendary names like Aerojet Rocketdyne (AJRD 3.05%), ball company (BALL 1.42%), Boeing (BA 1.57%), Lockheed Martin (LMT 2.31%)and Northrop Grumman (NOC 1.99%) – companies that have been involved in space exploration for decades, even since the days of the Apollo missions – are by definition large, well-funded and proven survivors. They are the kind of top notch investments a passive income investor actually strength want to consider buying when they are looking for a steady stream of dividend income.

If you consider yourself even more of a space fanatic than a passive income investor — to the extent that you’re willing to ignore dividend investment ideas in banking, for example, or among stocks utilities — and you’re focusing your research exclusively on the space sector, these are the companies you should focus on.

And one of them stands out from the others.

Boeing and Aerojet

Right off the bat, any space investor seeking passive income from an investment can strike Boeing and Aerojet Rocketdyne off the list. While the major players in the space industry – Boeing built the Space Station and is part of the United Launch Alliance rocket-building consortium, and Aerojet is the space industry’s go-to supplier of solid rocket engines – neither Boeing neither Aerojet currently pays a dividend to its shareholders.

Ball and Northrop Grumman

Continuing, however, we quickly see two other “old space” companies, Ball Corporation and Northrop Grumman, paying dividends – 1.6% and 1.5%, respectively. And in case you were wondering, Ball – while best known as a container manufacturer – also operates a space division that manufactures satellites and accounts for around 14% of company revenue according to data from S&P Global Market Intelligence. Ball is a bit pricey, however, weighing in at nearly 21 times earnings. Northrop Grumman looks cheaper at 14 times earnings. But if what interests you most is dividend income, the biggest disqualifying factor is probably this:

The average S&P 500 stock pays a dividend yield of 2%. Ball’s and Northrop’s dividends are therefore both about 25% below average.

Lockheed Martin – last stock standing

This brings us to Lockheed Martin. The greatest pure-play in the world defense equipment in terms of revenue, Lockheed Martin is also one of the largest space stocks in the world, with 12-month sales of $12.2 billion in its “space” segment (about 19% more than Northrop , and probably more than Boeing as well).

With its 3% dividend yield, Lockheed Martin is too by far the most generous dividend payer among space stocks. Not only that, but its 3% yield is 1.5 times the size of the average dividend payer on the S&P 500, making it a very good dividend-paying stock. period — not just a good dividend stock for space investors. And with a payout ratio of just 64%, Lockheed actually has room to increase its dividend payouts so it can become an even better dividend investment over time.

Additionally, Lockheed Martin sees space as a growth area for its business, one that could help grow the profits that enable these dividend payments. As Space News reported last week, Lockheed Martin space system chief Robert Lightfoot outlined an “urgent” plan to increase spending on its space investments, which include investments in rocket companies ABL Space. and rocket lab (RKLB 0.71%)and at the satellite manufacturer Earth orbital (LLAP 7.82%). The company is also expanding its work internationally to support space ventures and space activities overseas.

On top of all that, Lockheed Martin shares are selling at a relatively svelte price of 17.8 times trailing earnings — a roughly 7% discount to the average S&P 500 stock valuation — despite the payout. a better dividend than most S&P 500 stocks.

If you’re looking to earn passive income from space stock without taking on excessive risk, Lockheed Martin seems like a pretty good way to do it.

Share.

Comments are closed.