2 Dividend Stocks That Are Off of Hot Starts to 2026

Lockheed Martin shares have surged ~32% YTD after reporting a record $194 billion backlog and describing 'unprecedented demand,' trading at roughly 21x forward earnings and yielding ~2.2%. Texas Instruments is up ~26% YTD after Q4 2025 revenue of $4.4 billion (up 10% YoY) driven by strong data-center demand; the stock trades at a forward P/E of ~33, yields ~2.6%, and has raised its dividend for 22 consecutive years. Both names are presented as buy-and-hold, dividend-anchored equities with solid fundamentals and growth catalysts in defense spending and data-center semiconductor demand.

Analysis

Market structure: LMT’s 32% YTD surge signals prime-contractor re-rating as governments accelerate procurement — direct winners are Tier-1 primes (LMT, GD, NOC) and long-cycle suppliers; losers are smaller subs with limited backlog conversion and commercial aero OEMs if budget reallocations persist. TXN’s 26% rise reflects data-center driven demand for analog/embedded chips (breadth: >80k parts) rather than pure AI GPUs, implying durable revenue diversification and pricing power in analog niches while foundry-constrained logic players face different dynamics.

Risk assessment: Tail risks include a fiscal pivot (US/Europe defense cuts reducing new awards by >20% over 12–24 months), export-control shocks to semiconductor supply chains, or sudden inventory drawdowns at hyperscalers that cut TXN revenue >10% QoQ. Near-term (days–weeks) volatility will track earnings/guidance; medium-term (3–12 months) depends on FY appropriations and capex cycles; long-term (1–3 years) hinges on backlog conversion rates and secular digital/industrial demand for analog components.

Trade implications: Favor selective long exposure to LMT and TXN but hedge execution risk: size initial positions to 1–3% PV for LMT and 1–2% for TXN, scale to target 4–6% if guidance confirms >5% YoY revenue growth for TXN and LMT converts >50% of new orders within 12 months. Use income-oriented options (LMT covered calls 3-month ATM+3–6% to harvest yield) and bullish TXN 6–9 month call spreads 5–15% OTM to limit capital at risk.

Contrarian angles: Consensus prizes headline momentum and dividend safety but may underweight conversion and cyclicality risks — LMT’s $194B backlog is lumpy; a 10–20% slippage in awards would materially compress forward EPS. TXN’s 33x forward P/E already prices sustained data-center strength; a 1–2 quarter slowdown in hyperscaler spend would make TXN vulnerable to 15–30% downside, creating opportunity to add via put spreads at 6–9 month expiries.

Key Decisions for Investors

• Establish a 2% portfolio long position in LMT (buy shares) now and layer to 4% if next two quarters show backlog conversion >50% and revenue guidance rises >3% YoY; immediately sell 3-month covered calls at ATM+3–6% to generate ~1–2% quarterly income and cap upside.
• Initiate a 1.5% portfolio directional position in TXN via a 6–9 month call spread (buy 5% OTM, sell 15% OTM) sized to risk no more than 0.5% PV; increase to 3% total if sequential revenue growth >4% and data-center end-market commentary remains positive for two consecutive quarters.
• Execute a relative-value pair: go long LMT and short GD (1:1 dollar exposure) sized 1–2% portfolio for 3–6 months if LMT wins new contract announcements that GD does not — take profits if spread compresses >8% or diverges >12%.
• Buy protective 6–9 month puts (or collars) on combined LMT+TXN exposure sized to limit portfolio drawdown to 8%; unwind if implied vols fall >25% from entry or if either company issues guidance raising FY revenue by >5%.
• Monitor two hard triggers before allocating more capital: (A) US FY appropriations passage/committee report by Oct 2026 confirming >3% nominal increase in defense topline, (B) TXN inventory days at hyperscalers falling below 60 days or company guidance implying >5% YoY growth; act within 5 trading days of trigger.