BAE Systems (LON:BA.) Is Due To Pay A Dividend Of £0.124

BAE Systems plc (LON:BA.) has announced that it will pay a dividend of £0.124 per share on the 2nd of December. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

View our latest analysis for BAE Systems

BAE Systems' Payment Could Potentially Have Solid Earnings Coverage

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 quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 37.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, 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 an extended history of paying stable dividends. Since 2014, the dividend has gone from £0.201 total annually to £0.309. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

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 8.1% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like BAE Systems' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for BAE Systems that investors need to be conscious of moving forward. Is BAE Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.