What they do in practice is more like "literal when convenient." They have no consistent hermeneutics. They can pick and choose when to be "literal" and when to spiritualize.
For anyone interested, some helpful articles on Dispensational hermeneutics:
(Excuse the caps which are due to cut and paste.)
LITERAL VS. ALLEGORICAL INTERPRETATION
http://www.pre-trib.org/data/pdf/Ice-LiteralvsAllegorical.pdf
LITERAL HERMENEUTICS, THEOLOGICAL METHOD,
AND THE ESSENCE OF DISPENSATIONALISM
http://www.pre-trib.org/data/pdf/Stallard-LITERALHERMENEUTICST.pdf
The Nature and Result of Literal Interpretation
http://www.pre-trib.org/data/pdf/Radmacher-TheNatureandResultofL.pdf
THE LITERAL INTERPRETATION OF PROPHECY
http://www.pre-trib.org/data/pdf/Ice-TheLiteralInterpretationO.pdf
THE LITERAL FULFILLMENT OF BIBLE PROPHECY
http://www.pre-trib.org/data/pdf/Ice-TheLiteralFulfillmen.pdf