BAE Systems (LON:BA.) Has Announced That It Will Be Increasing Its Dividend To £0.104

BAE Systems plc (LON:BA.) will increase its dividend on the 30th of November to £0.104, which is 5.1% higher than last year's payment from the same period of £0.099. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

See our latest analysis for BAE Systems

BAE Systems' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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.

The next year is set to see EPS grow by 54.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

BAE Systems Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.188 in 2012, and the most recent fiscal year payment was £0.251. This means that it has been growing its distributions at 2.9% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

We Could See BAE Systems' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that BAE Systems has grown earnings per share at 5.2% 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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