President Biden warns that risk of nuclear ‘Armageddon’ is at its highest since the Cuban Missile Crisis – top 3 stocks to watch if tensions continue to rise
The Fed’s rate decision, the Labor Department jobs report and corporate earnings are dominating the headlines lately. But in this day and age, you may also want to pay attention to the ongoing war between Russia and Ukraine — because the consequences can be dire.
After Russian officials talked about the use of tactical nuclear weapons a few months ago, US President Joe Biden warned that the risk of a nuclear “Armageddon” had not been this high in 60 years.
“We haven’t faced the prospect of Armageddon since Kennedy and the Cuban Missile Crisis,” he said at a Democratic fundraiser last October.
“He’s not joking when he talks about the possibility of using tactical nuclear weapons or biological and chemical weapons, because his military is, you might say, underperforming,” Biden said. added, referring to Russian President Vladimir Putin.
Do not miss
“I don’t think it’s possible to easily use tactical nuclear weapons without ending up with Armageddon.”
It’s a scary image. The possibility of nuclear war makes all other problems trivial by comparison.
And that means for investors, there’s one segment that simply can’t be ignored – defense.
A safe haven amid global turmoil?
In a world where technology is advancing rapidly, defense stocks may not be as exciting as those from Silicon Valley. But here’s the thing: no matter what the economy is doing — and what the Fed does with its benchmark interest rate — governments around the world tend to prioritize national security.
In other words, defense contractors can make money even as the economy slows. With many experts predicting a recession this year, that’s a good quality to have.
Don’t forget, we live in a time of increasing geopolitical tension. No one wants to watch Armageddon, but if conflict does arise, you can bet that defense spending will likely increase.
In fact, the amount of money that countries are spending on their militaries is already huge. According to the Stockholm International Peace Research Institute, global military spending will total $2.113 trillion by 2021.
With that in mind, let’s take a look at three defense stocks. This trio also pays dividends.
Lockheed Martin
Known for its F-35 fighter jet, Lockheed Martin (NYSE:LMT) is the world’s largest defense contractor by revenue.
The company operates through four business segments: Aviation, Rocket and Fire Control, Rotation and Mission Systems, and Space.
In Q4 2022, each of the four segments delivered higher net sales than a year ago.
For the company as a whole, net sales increased 7% year over year to $19.0 billion.
Lockheed Martin pays a quarterly dividend of $3.00 per share, which translates to an annualized return of 2.6%.
Going forward, the company is likely to remain busy as its total backlog amounts to $150.0 billion as of December 31.
general motivation
General Dynamics (NYSE:GD) has deeply penetrated the global defense and aerospace business. It offers a broad portfolio of products and services, from business jets and Gulf combat vehicles to nuclear-powered submarines and communications systems.
In 2022, revenue is up 2.4% from 2021 to $39.4 billion while net income is up 4.1% to $3.4 billion.
General Dynamics President and CEO Phebe N. Novakovic commented that the company had “good growth in backlog” thanks to “strong demand in Gulfstream”.
Indeed, General Dynamics’ $91.1 billion backlog is the highest in its history.
The company paid $1.4 billion in dividends in 2022 and currently has a yield of 2.2%.
Northrop Grumman
Given rising military spending and concerns about the possibility of military conflict, it’s no surprise that defense stocks have turned out to be the better performers in the market.
Case in point: Northrop Grumman (NYSE:NOC) stock is up 20% over the past 12 months, in stark contrast to the S&P 500’s 8% drop over the same period.
Northrop Grumman is another heavyweight in the aerospace and defense industries. It built the B-2 stealth bomber – the only stealth bomber in the world. In fact, the B-2 is so iconic that it has appeared in quite a few movies, including Independence Day and Armageddon.
The US Department of Defense recently unveiled the B-21 Raider, a next-generation stealth bomber built by Northrop Grumman.
In 2022, the company generated $36.6 billion in revenue, up 3% from 2021. Northrop Grumman has a quarterly dividend yield of $1.73 per share, which is roughly the same rate. annual rate is 1.5%.
What to read next?
This article is for information only and should not be construed as advice. It is provided without warranty of any kind.
