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BAE Systems' (LON:BA.) Shareholders Will Receive A Bigger Dividend Than Last Year

·3 min read

BAE Systems plc (LON:BA.) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of November to £0.104. This makes the dividend yield about the same as the industry average at 3.2%.

See 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. The last dividend was quite easily covered by BAE Systems' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 55.3% over the next year. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

BAE Systems Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from £0.188 total annually to £0.256. This means that it has been growing its distributions at 3.1% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See BAE Systems' Dividend Growing

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. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

BAE Systems Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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