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Defence contractors like BAE Techniques (LSE:BA.) typically show to be nice dividend shares to carry over the long run. This specific FTSE 100 operator has grown its annual dividend yearly since 2012.
It’s lengthy report of payout progress displays BAE’s market-leading place and the resilient nature of defence spending. Demand for weaponry and associated {hardware} stays broadly steady no matter broader financial circumstances.
Actually, the outlook for defence spending is stronger now than it has been for many years. And so holders of the Footsie firm can realistically anticipate dividends to continue to grow as gross sales (possible) strengthen, at the very least over the close to time period.
Additional progress anticipated
My optimistic take is shared by Metropolis analysts. Because the desk beneath exhibits, dividends on BAE Techniques shares are tipped to maintain rising by way of to the tip of 2026:
| Yr | Dividend per share | Dividend progress | Dividend yield |
|---|---|---|---|
| 2025 | 35.92p | 9% | 2.2% |
| 2026 | 39.50p | 10% | 2.5% |
Encouragingly for buyers, these dividend projections are nicely coated by anticipated earnings over the interval, too. So even when income are blown off track — for example, by provide chain points or mission supply issues — the corporate may nonetheless be in good condition to fulfill dealer forecasts.
Dividend cowl rings in at 2.1 occasions for every of the subsequent two years, beating the extensively regarded minimal stage of two occasions that buyers crave. This could give the corporate the pliability to fulfill payout forecasts whereas additionally persevering with to take a position for progress.
Robust foundations
That’s to not say I’m anticipating income to disappoint over the subsequent couple of years. BAE Techniques’ gross sales and working revenue rose 14% and 4%, respectively, in 2024, to £26.3bn and £2.7bn.
With a powerful order ebook — the corporate’s order backlog rose £8bn final 12 months, to £77.8bn — the enterprise has robust earnings visibility over the interval too.
On prime of this, the FTSE 100 firm has appreciable monetary assets it may name upon to develop dividends consistent with forecasts. Free money stream stays robust and was a formidable £2.5bn in 2025, helped by robust buyer advances and spectacular operational money conversion.
BAE’s £1.5bn share buyback programme (on account of full in 2026) underlines the robustness of its steadiness sheet.
A prime purchase?
BAE Techniques’ hovering share value has had a unfavourable influence upon the corporate’s ahead dividend yields. For the subsequent two years they sit a way beneath the FTSE 100 ahead common of three.5%.
Nonetheless, I consider the prospect of speedy, inflation-beating payout progress within the years forward makes the inventory value critical consideration for passive revenue.
There are hazards the corporate might face additional down the road. Significantly troubling is the prospect that US defence spending will fall underneath President Trump’s effectivity drive. The US is the corporate’s largest single market.
However on steadiness, I feel BAE Techniques shares are an especially enticing possibility for each progress and dividend buyers, supported by surging defence spending by non-US NATO nations.
