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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
When it comes to dividend growth, BAE Systems (LSE:BA.) is one of the FTSE 100\u2018s greatest shares. Annual dividends have risen for the last 22 straight years.<\/p>\n
What\u2019s more, during the past decade they\u2019ve increased at an impressive average annual growth rate of 6.1%:<\/p>\n
Year<\/p>\n
Dividend per share<\/p>\n
2025<\/p>\n
36.3p<\/p>\n
2024<\/p>\n
33p<\/p>\n
2023<\/p>\n
30p<\/p>\n
2022<\/p>\n
27p<\/p>\n
2021<\/p>\n
25.1p<\/p>\n
2020<\/p>\n
23.7p<\/p>\n
2019<\/p>\n
23.2p<\/p>\n
2018<\/p>\n
22.2p<\/p>\n
2017<\/p>\n
21.8p<\/p>\n
2016<\/p>\n
21.3p<\/p>\n
This great growth record means the dividend yield on BAE shares has averaged 3.7% since 2016. That\u2019s at the upper end of the FTSE 100\u2019s long-term average (3% to 4%).<\/p>\n
The question is, what makes the defence company such a reliable passive income grower? And more importantly for investors today, can it keep its proud dividend record going?<\/p>\n
Visibility and cash <\/p>\n
Like other defence shares, BAE Systems enjoys supreme earnings visibility, giving it the confidence to raise dividends each year. This reflects the critical nature of the products it supplies, and the long-term government contracts it enjoys.<\/p>\n
Encouragingly, profit visibility right now is the best it\u2019s ever been \u2014 as of December, BAE\u2019s order backlog was a record \u00a383.6bn. The reason why? Defence budgets have boomed in recent years, and in 2025, hit new all-time highs amid rising geopolitical tensions.<\/p>\n
Another reason for BAE\u2019s strong dividend growth record is its immense cash flows. This is helping the company fund a huge \u00a31.5bn, three-year share buyback programme as well as paying increasingly tasty dividends. The firm\u2019s expecting to generate \u00a36bn of free cash flow between now and 2028 to fund shareholder returns and invest in the business.<\/p>\n
Finally, BAE Systems dividend policy is to maintain a payout ratio of roughly 50% of earnings. The result? A balance between rewarding shareholders and funding business growth which supports steady, long-term dividend growth.<\/p>\n
What\u2019s the catch? <\/p>\n
Having said all this, dividends are never guaranteed, never mind the payout growth BAE shares have reliably delivered. Rising competition and a loss of top-tier status with major customers could put future payout growth in jeopardy.<\/p>\n
And while the business has a great track record of project execution, disastrous tech failures in the field are a constant threat for any defence company. And one that could have a significant impact on future returns for BAE investors.<\/p>\n
So should investors still contemplate buying the FTSE stock for dividends? All things considered, my answer is an emphatic \u2018yes\u2019. City analysts are certainly confident dividends will keep growing over the medium term, forecasting 2025\u2019s full-year payout of 36.3p per share will rise to:<\/p>\n
39.6p in 2026<\/p>\n
44.3p next year<\/p>\n
49.2p in 2028<\/p>\n
How secure are forecast dividends? <\/p>\n
BAE\u2019s cash rich balance sheet and strong dividend cover leaves these forecasts looking in good shape. Predicted earnings cover expected payouts between 2 and 2.3 times each year to 2028.<\/p>\n
There\u2019s one fly in the ointment for income investors, though. Dividend yields sit at 2% for this year, 2.2% for 2027, and 2.4% the year after. Each is below the 10-year average of 3.7%. Still, the prospect of reliable and rapidly growing dividends long into the future makes BAE Systems shares worth serious attention.<\/p>\n
Should you invest \u00a35,000 in BAE Systems right now? <\/p>\n
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.<\/p>\n
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?<\/p>\n
See The Six Stocks<\/p>\n
Royston Wild does not hold any positions in the companies mentioned.<\/p>\n
The post How have BAE Systems shares become a dividend powerhouse? 5 reasons why!<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images When it comes to dividend growth, BAE Systems (LSE:BA.) is one of the FTSE…\n","protected":false},"author":2,"featured_media":53748,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21224],"tags":[21234,8160,26522,22805,26521],"class_list":["post-53747","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bae","tag-bae","tag-bae-systems","tag-defence-company","tag-dividend","tag-growth-record"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116675673121394564","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/53747","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=53747"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/53747\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/53748"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=53747"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=53747"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=53747"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}