Lockheed Martin's F-35 contract provides revenue transparency through the 2060s.
Lockheed Martin recently reminded investors it has a solid drone business, too.
Ambev boasts monopolistic positions across numerous Latin America regions.
"The true investor...will do better if he forgets about the stock market and pays attention to his dividend returns." -- Benjamin Graham
Many investors follow closely the ups and downs of the stock market, waiting for share price gains. Many investors also overlook another strong source of returns: the dividends many companies dish out to shareholders. If you're browsing for ideas, here are two rock-solid companies with economic moats and a dividend to pay you while you sleep!
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When it comes to investments, a pretty good place to start is the U.S. Department of Defense, the largest military budget on planet Earth. It's what has made Lockheed Martin (NYSE: LMT) a bellwether of the defense contracting industry after deriving roughly 75% of its $71 billion in sales last year servicing contracts from the DoD.
The great news for long-term investors is that it's a stable source of revenue, as its F-35 contract is the largest defense procurement program ever awarded, and goes through the 2060s. You also won't be shocked to hear that so-called rivals, such as China, Russia, and even hot spots like Iran and North Korea, aren't going away anytime soon. As such, the U.S. defense spending is likely to increase under the Pentagon's focus to modernize the military's ability -- and that's good news for Lockheed Martin investors.
F-35A Lightning II Image source: Lockheed Martin.
Further, Lockheed sent a memo to investors recently, reminding everyone that it also makes pretty impressive drones, too. Not even a week ago, Lockheed unveiled Vectis, a "lethal collaborative combat aircraft to advance unparalleled air dominance for American and allied militaries."
Vectis is a drone designed to work with fighter jets and intended to be a fast-developed, stealthy, and affordable jet. It's a good sign for long-term investors who were concerned Lockheed's business would suffer if drones began replacing manned platforms, such as its lucrative F-35, over the coming decades.
Lockheed trades at a price-to-earnings ratio of 27 times, and also offers investors a healthy dividend yield of 2.7%, while investors enjoy the stability of its long-term lucrative F-35 contract as well as its expanding drone business.
Ambev (NYSE: ABEV) is the largest brewer in Latin America and the Caribbean, and is Anheuser-Busch InBev's subsidiary in the region; it produces, distributes, and sells beer as well as PepsiCo products in Brazil and other Latin American countries and was formed in 1999 through a merger of Brazil's two largest beverage companies, Brahma and Antarctica.
With that history lesson aside, the company has proven it can dominate markets. In fact, Ambev has monopolistic positions across regions that include roughly 60% beer market share in Brazil, 65% in Argentina, El Salvador, and Uruguay, and over 70% in Bolivia, according to Morningstar.com.
Here's the upside for investors: Per capita beer consumption across most Latin American countries is lower than typically found in developed countries, which should pave the way for valuable volume growth for Ambev. The company also has a trick up its sleeve because there's been a noticeable trend of consumers opting for foreign beers over domestic ones, which is an opportunity for Ambev to leverage Anheuser-Busch InBev's wide premium portfolio that includes Budweiser, Corona, and Michelob Ultra.
It's tough for regional competition to match the scale of Ambev, and the company should be able to maintain its market share through economic cycles while still dishing out its high-yield dividend of 7.6%.
Both of these stocks offer investors a healthy dividend, long-term potential, and competitive advantages. The product complexity in Lockheed Martin's defense business helps keep new entrants on the sidelines, while its lengthy F-35 contract gives financial stability and transparency. Ambev has a strong scale advantage over regional peers and plenty of room for growth if developing countries increase their beer consumption and continue reaching for premium import brands. Both stocks can be cornerstones in many portfolios looking for some dividend income.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.