There have been very few pockets of strength for dividend investors during this severe economic crisis, such as the global defense giant Lockheed Martin (LMT). It would be safe to say that few investors are questioning their ability to sustain their dividend at the moment; however, the same could have also been said for Boeing (BA) not all that long ago. Whilst I am certainly not suggesting the same fate awaits Lockheed Martin, it nonetheless is still worthwhile to stress test their dividend sustainability since a Presidential election is only months away and a key export market, Saudi Arabia, is under immense budgetary pressure.

When assessing dividend coverage, I prefer to forgo using earnings per share and use free cash flow instead, since dividends are paid from cash and not from “earnings”. The graph included below summarizes their cash flows from the last quarter and previous three years.

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