The BAE Systems (LSE:BA.) share price flirted with an all-time high earlier this month. Since then though, it’s dipped almost 10% amid a wider pullback in defence stocks.

Yet the long-term outlook for higher military spending looks as strong as ever. The US and Middle East are increasing their defence budgets alongside European nations. Japan and Australia are also rattled and are doing the same.

So has this simply opened up another dip-buying chance to consider taking? Let’s take a closer look at BAE.

Brokers remain positive

Turning to brokers first, they have a 2,356p average share price target. That’s 13% higher than the present price, with the majority of analysts bullish on the stock.

At the end of last month, JPMorgan lifted its target slightly from 2,400p to 2,450p, citing resilient demand across air, munitions, and maritime. This came after BAE hiked its 2026 underlying operating profit growth guidance to 10%–12%, up from the previous 9%–11%.

Since the tragic Ukraine war started in early 2022, the FTSE 100 company’s backlog has nearly doubled to £84bn. BAE offers everything from small-arms ammunition to nuclear-powered submarines and stealth fighter jets.

This massive order backlog, alongside increasing opportunities globally, positions BAE to keep delivering solid long-term growth.

Valuation and dividend

After the recent pullback, the stock sells for 22.7 times forward earnings. That’s not cheap by historical standards, but it’s lower than peers like Rheinmetall (31.7), General Dynamics (23.2), and RTX (28.8).

Admittedly, the forward-looking dividend yield looks modest, at just 2.1% for 2027. But the defence giant returned almost £1bn to shareholders via dividends and buybacks in the first six months of 2026, and the payout is tipped to grow at about 10% moving forwards.

The biggest risk is military spending increasing at a slower rate than expected, especially in Europe. And elevated multiples across all defence stocks are also worth noting (a sector-wide sell-off would take BAE down with it).

Yet I’m inclined to see the pullback as a buying opportunity to consider taking. BAE is engaged in multi-decade programmes for attack submarines and a next-generation fighter jet, while US policy continues to push European allies to shoulder more of the defence burden as Washington moves resources towards the Pacific and China.

What about this one?

Looking at AJ Bell’s data though, it seems UK investors are much more keen on QinetiQ (LSE:QQ). This FTSE 250 defence stock is the fifth-most-bought on the platform in the past week.

What do these investors see here? Perhaps it’s that QinetiQ generates the vast majority of its revenue from the UK Ministry of Defence. And with Andy Burnham’s new government seemingly ready to find extra money for the military, QinetiQ could disproportionately benefit from this compared to the more globally focused BAE. 

Also, the UK’s Defence Investment Plan aligns with many of the company’s areas of expertise, including cybersecurity, electronic warfare, and anti-drone technology. So growth could accelerate in the coming years.

Finally, the stock looks good value, at just 14.6 times forward earnings. There’s also a 2.3% forecast dividend yield.

QinetiQ’s lack of geographic diversification adds risk, but the stock also looks attractive to me. In fact, assuming an investor has no ethical qualms about defence shares, both could be worth considering for a portfolio.

Should you invest £5,000 in BAE Systems right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Six Stocks

 

Ben McPoland owns shares in BAE Systems.

The post Here are the 2027 BAE Systems share price and dividend forecasts appeared first on The Twelfth Magpie.

More reading

The Twelfth Magpie 2026