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BAE Systems plc's (LON:BA.) dividend will be increasing from last year's payment of the same period to £0.104 on 30th of November. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.
See our latest analysis for BAE Systems
BAE Systems' Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by BAE Systems' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 55.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.
BAE Systems Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.188 in 2012, and the most recent fiscal year payment was £0.256. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
BAE Systems Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. BAE Systems has impressed us by growing EPS at 5.3% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like BAE Systems' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 14 BAE Systems analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is BAE Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.