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Meet Iraq's New Air Force, Compliments of Lockheed Martin

The new FA-50 light attack jet. Source: KAI.

Don't look now, but Iraq is getting its air force back up and running -- and it has Lockheed Martin (NYSE: LMT  ) to thank for it.

Iraq inked a deal to buy three dozen Lockheed Martin F-16 fighter jets back in 2008, to form the backbone of its renewed air force. Earlier this year, we learned that L-3 Communications (NYSE: LLL  ) has been engaged to sell the Iraqis training systems  for the new jets -- and just in time. The Iraqis paid $1.5 billion up the planes' delivery back in 2011, and another $830 million this past summer. Deliveries are expected to begin next year, and to wrap up by 2018.

Over the weekend, though, we learned that Lockheed may be playing a role in another transaction that will further bolster the Iraqi Air Force. On Saturday, reported that South Korea's Korea Aerospace Industries, or KAI, is building two dozen FA-50 aircraft for Iraq.

The FA-50 -- a variant of Lockheed's T-50 trainer -- is described as a "light attack" fighter jet. In its usual configuration, called "Golden Eagle," equipped with a single General Electric (NYSE: GE  ) F404 engine, the T-50 has a top speed of 1,100 miles per hour, or about Mach 1.45. Built for Iraq, the fighter will be designated the T-50IQ. It can be equipped with everything from simple machine guns and bombs, to air-to-surface and even air-to-air missiles.

Mama? Where do baby fighter jets come from?
KAI builds these fighter jets for use by the South Korean Air Force, but Lockheed was involved in their development from the beginning. In one company presentation, Lockheed describes its role as contributing 13% to the T-50's development cost, and notes that 55% of the plane's "work content" is of U.S. origin. KAI also has a joint marketing agreement with Lockheed, whereby the two companies cooperate in selling the variants of Lockheed's T-50 training jet around the world.

Eventually, KAI hopes to capture about 30% of the global supersonic jet trainer market -- and sell 1,000 T-50s and their derivations. (One presumes Lockheed will collect licensing fees, or be paid for parts that it contributes to the planes KAI builds. Lockheed, however, declined to comment on any "financial details about the ROK / Iraq T-50IQ contract.")

KAI will be paid $1.1 billion for the planes. That works out to about $45.8 million per plane -- plus a further $1 billion for maintaining, and training pilots to fly them over the next 25 years. How much of this will go to Lockheed, though, remains anybody's guess.

Oh, and one more thing
Did we mention how Lockheed Martin shareholders might benefit from these fighter jet sales, too? It's true, because Lockheed pays its shareholders a 3.9% dividend yield! Mustn't forget that bit -- because dividend stocks can make you rich. It's as simple as that.

While they don't garner the notability of high-flying tech stocks, dividend-paying stocks are also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On December 17, 2013, at 9:03 AM, steekyjim wrote:

    How long before the Iraqis are using them against their own people? It's crazy that we keep pumping these weapons into a very volatile part of the world.

  • Report this Comment On December 17, 2013, at 10:06 AM, Grandpastu wrote:

    War=money and money=war. It's as simple as that.

  • Report this Comment On December 17, 2013, at 8:37 PM, notsoblind wrote:

    Hope they installed OnStar.

    that way if they get stupid, we can shut off the engines in flight...

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