How to Invest in L3Harris Technologies

Aware that global tensions show few signs of tapering off anytime soon, investors have taken particular note of defense businesses like L3Harris Technologies (LHX 0.03%), a leading defense contractor offering solutions for space, air, land, sea, and cyber military settings.

The company is now known for its advanced technology that underpins sophisticated solutions, including autonomous systems and missile warning and defense networks. However, L3Harris has a history that stretches back more than 130 years and is grounded in much simpler technology -- sheet feeders for printing presses.

It's important to recognize that while L3Harris is a major defense contractor, it's also committed to the civilian sector. Though it plans to divest its commercial aviation solutions business in 2024, it still engages in non-defense-related businesses, such as manufacturing maritime drones for the energy industry and rocket engines for space exploration.

There are some important considerations for investors looking to strengthen their holdings with L3Harris stock. Those include how to buy shares, whether the company is profitable, its dividend structure, and alternative investment opportunities.

How to buy

How to buy L3Harris Technologies stock

Maybe you've built a strong portfolio, or maybe buying shares of L3Harris will be the first step on your investing journey, or maybe you're somewhere in between. Regardless of your level of investing experience, there are some basic steps to gain exposure to L3Harris, which trades under the stock ticker LHX.

Step 1: Open a brokerage account

Before you fortify your portfolio with L3Harris stock, there are some critical things to accomplish first, like opening a brokerage account. Although there are many options, inexperienced investors may want to consider Fidelity, which offers $0 commission for online stock trades.

Step 2: Figure out your budget

Stock investing is a great step toward growing personal wealth, but you shouldn't jeopardize your financial well-being by buying stocks without careful thought. It's important to review your finances and assess how much money you can comfortably invest while still taking care of monthly expenses and adding to your savings.

Step 3: Do your research

Whether L3Harris is the stock pick on your radar or there's another name you find compelling, it's essential that you do your due diligence and investigate the company thoroughly. This should include looking at the company's strengths, weaknesses, opportunities, and threats (SWOT) and considering the stock's valuation.

Step 4: Place an order

With your research complete, it's time to become an L3Harris shareholder. After entering the stock's ticker (LHX for L3Harris) and opting to buy the stock, you'll need to decide whether you want to place a market order or a limit order. (The Motley Fool recommends a market order since it guarantees your purchase will be made at the current market price.)

Next, you'll have to determine the size of your purchase -- whether you will buy a fractional share, a single share, or hundreds of shares. The image below provides a step-by-step guide to what it looks like to purchase stock through Fidelity.

Should I invest?

Should I invest in L3Harris?

Although there's no blanket answer to every investor's question of whether L3Harris is a worthwhile investment, several factors can help individuals decide whether scooping up shares of L3Harris is a smart move for them.

For one, investors interested in a defense company that generates passive income will find L3Harris compelling. As of early May 2024, L3Harris stock offered a forward yield of 2.2% -- one of the higher yields found among aerospace and defense stocks. And it's not only the higher yield that makes the stock look appealing. From 2020 through 2023, L3Harris has averaged a conservative payout ratio of 66%.

Investors looking to expand their coverage to drone stocks will also find L3Harris attractive. In addition to the drones it manufactures for civilian and commercial customers, L3Harris designs drones for military use.

The company's FVR, for example, is a vertical take-off and landing drone, while the company also has an uncrewed service vehicle (USV) designed for maritime operations. The U.S. Navy awarded L3Harris a $35 million initial award for its USV in 2020.

L3Harris is also growing its presence in space, making the company a draw for those seeking exposure to the burgeoning space economy. In addition to the engines it produces for NASA, L3Harris designs and builds satellites for the military. At the end of 2023, L3Harris had a record 58 satellites in its backlog.

Profitability

Is L3Harris profitable?

One of the most pressing concerns for investors who are investigating potential stock picks is what appears at the bottom of the income statement. L3Harris has consistently generated a profit for the past 30 years.

In 2023, L3Harris reported diluted earnings per share (EPS) of $6.44. Investors digging into the company's past performances will notice it's a 17.3% increase over the $5.49 in diluted EPS it booked in 2022. It's important to note, however, that management credits the year-over-year profit increase to the company's reduced share count.

As part of its share buyback program, L3Harris repurchased $30 million in stock during 2023. It's possible that the same dynamic will play out in subsequent years since it has $3.9 billion of remaining money authorized for its repurchase program.

Dividends

Does L3Harris pay a dividend?

For the past 23 consecutive years, L3Harris has rewarded shareholders with an increasingly higher dividend. If the company returns $4.64 in dividends to shareholders in 2024, as is expected, it will mean that it will have hiked its dividend at a 10% compound annual growth rate over the past 10 years.

Taking a judicious approach to its dividend, L3Harris plans to pay out 35% to 40% of its free cash flow to shareholders from 2024 through 2026.

ETF options

ETFs with exposure to L3Harris

For investors interested in broader exposure to defense stocks, a defense exchange-traded fund (ETF) that includes L3Harris among its holdings is a great choice. The iShares U.S. Aerospace & Defense ETF (ITA 0.12%), for example, has L3Harris as its eighth-largest position, with a 4.4% weighting. With a 0.4% expense ratio, the iShares U.S. Aerospace & Defense ETF makes quarterly distributions.

For investors more drawn to the company's focus on the final frontier, the ARK Space Exploration & Innovation ETF (ARKX -0.58%) may be a more attractive option. The ETF focuses on companies operating in various capacities throughout space.

As of early May 2024, L3Harris is the ETF's sixth-largest holding, with a 5.1% weighting in the portfolio. The ARK Space Exploration & Innovation ETF has a 0.75% expense ratio.

Stock splits

Will L3Harris stock split?

Numerous companies split their stocks in 2023, and various stocks seem like strong candidates to split their stocks in 2024. L3Harris probably won't be one of them.

Frequently, companies will decide to split their stocks when the share prices soar to a price that may prevent investors from buying individual shares. With L3Harris trading between about $200 and $216 for much of the first half of 2024, it seems unlikely that management will find it advantageous to split the company's stock.

Related investing topics

The bottom line on L3Harris

For those looking to secure their portfolios with a stalwart defense contractor, L3Harris demands attention. But it's not only the company's defense expertise that will attract investors.

It is also a great drone stock and a worthwhile space stock. And making it even more alluring, the company's dedication to rewarding shareholders suggests L3Harris is a worthy option for investors targeting an income investment.

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