Why BAE Systems plc (LON:BA.) Is A Dividend Rockstar

Over the past 10 years BAE Systems plc (LSE:BA.) has returned an average of 4.00% per year from dividend payouts. The stock currently pays out a dividend yield of 3.75%, and has a market cap of UK£18.31B. Does BAE Systems tick all the boxes of a great dividend stock? Below, I'll take you through my analysis. Check out our latest analysis for BAE Systems

How I analyze a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?
• Does it consistently pay out dividends without missing a payment or significantly cutting payout?
• Has dividend per share risen in the past couple of years?
• Is it able to pay the current rate of dividends from its earnings?
• Will it be able to continue to payout at the current rate in the future?

How does BAE Systems fare?

The company currently pays out 64.43% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect BA.'s payout to fall to 49.43% of its earnings, which leads to a dividend yield of around 4.06%. However, EPS should increase to £0.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. BA. has increased its DPS from £0.11 to £0.21 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes BA. a true dividend rockstar. Relative to peers, BAE Systems has a yield of 3.75%, which is high for Aerospace & Defense stocks but still below the market's top dividend payers.

Next Steps:

Taking into account the dividend metrics, BAE Systems ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three essential factors you should further examine:

• 1. Future Outlook: What are well-informed industry analysts predicting for BA.’s future growth? Take a look at our free research report of analyst consensus for BA.’s outlook.
• 2. Valuation: What is BA. worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BA. is currently mispriced by the market.
• 3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.