As stock markets crash, here’s 1 FTSE 100 dividend stock to buy now

As stock markets crash, Paul Summers thinks this FTSE 100 (INDEXFTSE:UKX) stock might offer him great protection (and a solid dividend stream).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As stock markets crashed this morning, there aren’t many places for investors to hide. One exception is FTSE 100 defence giant BAE Systems (LSE: BA). Somewhat predictably, its shares are firmly in positive territory. Regardless of what happens next in Eastern Europe, I think this remains a great stock to hold for the passive income it generates.


Although unlikely to be the main catalyst for today’s rise in the share price (+5%, as I type), it’s worth touching on today’s unintentionally well-timed full-year results.

At £21.3bn, sales rose by 5% in 2021. Underlying earnings moved 13% higher to £2.21bn. Positively, the company also reduced its net debt pile down to £2.16bn from £2.72bn the year before. This is something I particularly like to see any company doing, even though I doubt this burden has caused investors any sleepless nights. 

On a statutory basis, revenue rose slightly to £19.5bn and operating profit jumped by almost 24% to £2.39bn. BAE’s order book decreased slightly to £35.5bn. 

As a whole, I see all this as a decent set of numbers from the FTSE 100 giant. Then again, I strongly suspect the share price would have moved higher today anyway. 

Dividend delight

Looking ahead, BAE said it expected total sales to grow between 2% to 4% in 2022. Encouragingly, roughly 75% of these are “already in the order backlog“.

Out of interest, its Maritime and Cyber & Intelligence divisions are likely to experience the biggest rise in sales. The latter comes as no surprise to me considering yesterday’s report from the Department for Digital, Culture, Media and Sport. It stated the UK cybersecurity sector achieved double-digit growth last year. As I’ve stated previously, I believe this will be one of the biggest investment themes of the next decade.

Importantly for income hunters, the FTSE 100 member said free cash flow in 2022 was now likely to be “in excess of £1bn“. That should mean that the dividend stream — BAE’s biggest attraction, in my opinion — should be just fine. 

Speaking of which, BAE announced a final dividend of 15.2p this morning. This brings the total cash return for FY21 to 25.1p per share. At the current share price, that equates to a trailing yield of 4%. Although nothing is guaranteed, analysts have the company hiking the dividend by another 5.5% this year.   

Safe haven?

The invasion of Ukraine by Russian forces is clearly worrying at a human level. Seen purely from an investment perspective however, there are certainly worse places to park my capital than BAE Systems. 

This is not to say the shares won’t experience some volatility in the weeks and months ahead. When times are tough, traders exit first and ask questions later. And right now, there’s no telling when this stock market crash will end. That’s hard to endure as an investor, even if it may lead to some great buying opportunities.

In addition to this, I should mention that the BAE share price is barely higher today compared to where it was five years ago. As well as going some way to justifying the stock’s relatively low valuation (12 times earnings), this also shows just how important those dividends are to the investment case. Without them, I’d be far less inclined to invest, as good as the aforementioned growth prospects for its cybersecurity arm are.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »