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BAE Systems plc's (LON:BA.) dividend will be increasing from last year's payment of the same period to £0.115 on 30th of November. This makes the dividend yield about the same as the industry average at 2.7%.
Check out our latest analysis for BAE Systems
BAE Systems' Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, BAE Systems was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 13.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.
BAE Systems Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was £0.195, compared to the most recent full-year payment of £0.281. This means that it has been growing its distributions at 3.7% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. BAE Systems has seen EPS rising for the last five years, at 23% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
BAE Systems Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that BAE Systems is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for BAE Systems for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.