Here’s the dividend forecast for BAE Systems shares through to 2026

BAE Systems’ shares are a favourite for investors seeking a reliable passive income year after year. Can the FTSE 100 company keep on delivering?

| 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.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

BAE Systems‘ (LSE:BA.) shares have proven to be an excellent source of passive income down the years. Like any stock, this FTSE 100 company comes with risk. But its excellent earnings visibility and strong cash flows gives it the means to consistently pay a decent dividend.

BAE Systems' dividend growth.
Created with TradingView

As the chart above shows, BAE Systems’ annual dividend has risen every year since the early 2000s. Payouts continued to rise even during the 2008 financial crisis and, more recently, the Covid-19 pandemic. Very few global shares have managed the same thing.

City analysts expect this trend to continue. In fact, the defence giant’s tipped to keep lifting cash rewards all the way through to 2026, at least.

Should you invest £1,000 in BAE Systems right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

See the 6 stocks

YearDividend per shareDividend growthDividend yield
202432.33p8%2.5%
202535.30p9%2.7%
202638.47p9%2.9%

However, dividends are by no means guaranteed. And past performance isn’t a reliable guide to the future. With this in mind, how realistic do current dividend forecasts look? And should I buy BAE Systems’ shares for my portfolio?

In good nick

The first part of my analysis is quite encouraging. For a variety of reasons, the firm’s predicted dividends through to 2026 look highly achieveable.

To begin with, estimated payouts are covered between 2 times and 2.2 times by expected earnings over the period. Any reading above 2 times provides a wide margin for error, in the event that profits come in lower than predicted.

This is important for defence stocks. Supply chain problems remain a huge issue at the minute, threatening potential revenues. On top of this, contract timings in the arms industry can be notoriously lumpy, affecting earnings from year to year.

Great dividend cover isn’t the only reason to be optimistic over future dividends either. BAE Systems has strong cash flows it can use to keep growing rewards even if the bottom line comes under pressure.

Net debt’s grown to £6.1bn following the acquisition of Ball Aerospace in February. This will be worth keeping an eye on but right now, the balance sheet still looks pretty robust.

Buy or no buy?

BAE Systems' share price.
Created with TradingView

Things are looking good for dividend income in the short-to-medium term then. But this alone doesn’t make BAE Systems a stock to buy.

When investing, I look for companies that might provide solid capital appreciation as well as a decent and growing passive income. And I’m seeking ones that can deliver this over the long term, say 10 years and more.

Pleasingly, I think BAE Systems looks good across all these criteria. Its share price has more than trebled during the past decade, driven by soaring arms sales following Russia’s invasion of Ukraine in 2022.

I’m expecting the share price to keep on ascending. Why? Well defence analysts expect weapons spending to continue rising too, amid growing fears in the West over Chinese and Russian expansionism, and the growing conflict in the Middle East.

Researchers at Zion Market Research, for instance, expect the aerospace and defence industry to expand at an annualised rate of 8.2% between 2023 and 2032.

With its expertise across multiple product classes, and its top supplier status with the US and UK, BAE Systems could be one of the best stocks to consider to capitalise on this opportunity.

Should you buy BAE Systems now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems. 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

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »