The Defense Sector Is Full of Dividend Stocks, but These 3 Are the Best

The defense sector is one of the best places to look for those hoping to invest in dividend stocks. Today, we've narrowed down the list to bring you the three best dividend stocks to buy today in the defense sector.

dividend stocksDefense companies often pay higher dividend yields compared to other popular stocks. On average, defense stocks boast a dividend yield of 1.79%.

Meanwhile, the 61 healthcare stocks in the S&P 500 - such as AbbVie Inc. (NYSE: ABBV) and Humana Inc. (NYSE: HUM) - offer an average yield of 1.75%.

S&P 500 tech stocks have an even lower average yield of just 1.5%. Big names like Facebook Inc. (Nasdaq: FB) and Amazon.com Inc. (Nasdaq: AMZN) don't even offer dividends to investors at all.

And defense stocks aren't just great investments because of their dividend yields. They also give you market-beating share-price growth.

Must See: This Great Depression-Era "Secret" Helped Transform Two Teachers into Millionaires. Read more...

The iShares Dow Jones Defense ETF (BATS: ITA) - which tracks 39 U.S. defense companies - has surged 20.7% so far in 2017. That beats both the Dow Jones and the S&P 500, which are up 11.9% and 11.4%, respectively.

But our Money Morning experts aren't recommending investing in that defense ETF.

Instead, they're going to show you three individual defense stocks that investors must add to their portfolios today...

The 3 Best Dividend Stocks to Buy in the Defense Sector Right Now

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Defense Dividend Stock Pick No. 3: Boeing Co. (NYSE: BA)

Company: Boeing Co.

Share Price: $239.42

Quarterly Dividend Payment: $1.42

Dividend Yield: 2.37%

Boeing - the world's second-largest defense contractor - has been one of Money Morning Executive Editor Bill Patalon's favorite defense stocks since 2011.

"This is a company that has a proven record of taking that cash flow and giving it back to shareholders in the form of dividends, stock buybacks, and other kings of financial engineering," Bill mentioned in February 2017.

The firm boasts a 2.37% dividend yield and pays $1.42 per share each quarter. Its quarterly dividend has grown 223% in the last five years and has increased each year since 2012, when it was just $0.44.

Boeing's profits have surged over the last four years. Annual earnings climbed 27.7%, from $5.96 per share in 2013 to $7.61 per share last year. Revenue also grew 9.2% over the same period, from $86.6 billion to $94.6 billion. This was due to the company's massive orders, including 926 commercial and defense aircraft deliveries to clients in 2016.

Annual earnings this year are expected to rise as much as 37.3% to $10.45 per share. This growth will largely come from Boeing's dominance in the commercial plane market...

Air Transport World reported Boeing had 451 commercial plane orders in August, valued near $73 billion. Boeing's orders beat out European competitor Airbus, which only logged 261 commercial orders, valued at $36.5 billion. From January to August, Boeing had 384 orders, while Airbus only had 215.

The Boeing stock price is up 53.7% to $239.42 this year. Analysts expect it to rise another 26.1% by September 2018.

No. 2: Raytheon Co. (NYSE: RTN)

Company: Raytheon Co.

Share Price: $182.50

Quarterly Dividend Payment: $0.80

Dividend Yield: 1.91%

Raytheon ties into what Money Morning Chief Investment Strategist Keith Fitz-Gerald calls his six "Unstoppable Trends."

These six trends are medicine, technology, demographics, scarcity/allocation, energy, and war, terrorism, and ugliness (also known as "defense"). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.

Raytheon is one of Keith's ugliness/defense stock recommendations. It supplies weapons used in some of the most important conflicts of 2017. In April, the United States struck a Syrian air base with 59 Tomahawk missiles produced by Raytheon. The strike was a response to Syrian President Assad's chemical attack on civilians.

The company's influence is also felt in the cybersecurity sector. Its cyber-defense subsidiary, Forcepoint, made up 2% of Raytheon's total 2016 revenue of $27.8 billion. Forcepoint also placed No. 3 in Cybersecurity Ventures' Cybersecurity 500, a list of the best cybersecurity firms to watch.

RTN stock pays a quarterly dividend of $0.80 per share (1.91% yield). Shares have gained 28.5% to $182.50 in 2017, and analysts say they could rise to as high as $212 in the next year. That's another potential gain of 16.2% on top of regular dividend payments.

No. 1: Lockheed Martin Corp. (NYSE: LMT)

Company: Lockheed Martin Corp.

Share Price: $303.06

Quarterly Dividend Payment: $1.82

Dividend Yield: 2.40%

Money Morning Technical Trading Specialist D.R. Barton, Jr., likes LMT stock and consistently recommends it to readers. Since his May 10, 2016, recommendation, shares are up 24% to its near-record high of $303.06 today.

We still think Lockheed stock is going higher, especially as it continues to ink high-profile, multimillion - even multibillion - dollar contracts...

The most high-profile contract was announced on June 30, when the U.S. Army awarded the company a $3.8 billion contract. Lockheed will produce a fleet of Black Hawk helicopters, which the Pentagon will sell to Saudi Arabia. And the company was awarded an $8 billion contract in August for providing logistics and maintenance support for the Special Operations Forces (SOF).

Lockheed's contracts seem to be stacking up quickly. The firm has received three new contracts from the Navy, totaling $63.9 million in the first two weeks of September alone.

Analysts agree LMT could keep pushing higher from today's record highs. They predict the stock could rise from today's $303.06 price to as high as $342 by September 2018.

On top of that potential price gain, Lockheed boasts a $1.82 quarterly dividend (2.40% yield). That beats out peers like General Dynamics Corp.'s (NYSE: GD) dividend of $0.84 (1.69% yield) and United Technologies Corp.'s (NYSE: UTX) dividend of $0.70 (2.55% yield).

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