The Motley Fool

£2k to invest? I think the BAE share price can help you get rich

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.

Dial being turned up to 'high'
Image source: Getty Images.

If you are looking for somewhere to invest £2,000 right now, I highly recommend taking a closer look at the BAE (LSE: BA) share price. I reckon this company has the potential to produce a steady income stream for investors for decades to come.

Its large order backlog and multi-decade contracts also put the company in a strong position to weather economic uncertainty in the years ahead. Today, I’m going to take a closer look at this FTSE 100 income champion.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

BAE share price on offer 

With the second wave of coronavirus building around the world, I think investors need to be careful in the current environment. However, it may be a lot easier to pick winners the second time around.

Indeed, some companies managed to navigate the first wave relatively well. They’ve gone on to yield market-beating returns for shareholders.

The BAE share price is one of these winners. Year-to-date, the stock has outperformed the FTSE 100 by around 10%, including dividends. 

Investor sentiment towards the defence contractor soured and the beginning of the year, after management decided to slash the group’s dividend to preserve capital. Luckily, the dividend drought only lasted a few months. At the end of July, BAE reinstated a 13.8p-a-share £460m payout deferred from April. The firm also declared an interim dividend of 9.4p a share.

The coronavirus crisis has had only a limited impact on the business. Half-year sales rose by almost 5% to £9.8bn. Due to a reduction in productivity due to social distancing, underlying earnings fell more than 10% to £895m in the first half of 2020.

Still, the firm is expecting sales to grow around 5% for the full year, thanks to the impact of two large US acquisitions. This growth should help support the BAE share price.

Long-term growth 

I expect this growth trend to continue. Despite the coronavirus crisis, defence spending is only growing around the world. The world’s military spending grew by 3.6% year-on-year to surpass $1.9 trillion in 2019. That’s the highest level this decade. Threats from Russia and China are forcing Western Nations to increase defence capabilities. While this might be bad news in terms of global peace, it’s relatively good news for the defence industry. 

As such, I’m optimistic about the outlook for the BAE share price. Over the past few months, the organisation has proven it can weather the economic uncertainty and global shutdowns bought in due to the coronavirus crisis. What’s more, the company’s near-5% dividend yield is highly attractive in the current interest rate environment. 

As the stock is trading at a forward price-to-earnings (P/E) multiple of just 13, the shares also seem to offer a wide margin of safety at current levels. Therefore, considering the company’s outlook, dividend income and defensive growth potential, I think it could be worth buying the BAE share price as part of a diversified portfolio today.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Rupert Hargreaves has no position in any of the shares 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.