It seems like BAE Systems plc (LON:BA.) is going to go ex-dividend at the subsequent 3 times. It is possible to buy stocks prior to the 6th of August so as to obtain the dividend, which the corporation is going to cover the 14th of September.
BAE Systems’s next dividend payment will be UK£0.14 per share, on the rear of this past year once the firm paid a total of UK£0.23 to shareholders. According to the previous year’s worth of obligations, BAE Systems has a tracking yield of 4.7% over the present stock price of £4.902. Dividends are a significant contributor to investment yields for long-term holders, but only as long as the dividend is still compensated. So we have to research whether BAE Systems could manage its volatility, and in the event the dividend could rise.
View our most recent evaluation for BAE Systems
Dividends are generally paid from business earnings, if a business pays more than it gained, its own dividend is generally at a greater chance of being cut. BAE Systems paid out 61% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see BAE Systems’s earnings per share have risen 10% per annum over the last five years. BAE Systems is paying a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current amount of payout, there may be a chance of further dividend increases in the future.
The main way the majority of investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. BAE Systems has delivered 4.4% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because BAE Systems is keeping back more of its gains to grow the business.
To Sum It Up
Has BAE Systems got what it takes to maintain its dividend payments? We like BAE Systems’s growing earnings per share and the fact that – while its payout ratio is around average – it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
While it’s tempting to invest in BAE Systems for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we’ve identified 1 warning sign with BAE Systems and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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