Are BAE Systems shares a great choice for FTSE 100 dividend investors?

Defense stocks are among the most popular during difficult geopolitical and macroeconomic periods. This explains why BAE systemThe change in the share price of BA (LSE:BA.) for the week is 43%.

At FTSE 100 weapons builder has risen in value as the war in Ukraine has boosted defense spending estimates. Concerns about the direction of the global economy are also increasing interest in the company. The use of weapons has historically remained unaffected by broader economic conditions.

So, could BAE Systems stock be the best choice for income investors today?

Average yield

Discussing a company’s dividend yield is a start. It shows how many shares are expected to pay out in dividends relative to the stock price. Therefore, it is a good yardstick to measure value for money.

BAE Systems Inc. dividend yield. in 2023 it is 3.4%, lower than the FTSE 100 forward average of 3.5%. Yield increases to 2024 but only fractionally, to 3.6%.

This shows that the business is not a good option to make passive income that beats the current market. There are dozens of FTSE index stocks with forward dividend yields north of this.

Also protected

That said, BAE Systems appears to be in good shape to meet the City’s projected payout. The same cannot be said for all London stocks as the global and UK economy is in dire straits.

The company pays 28.8p per share an annual dividend in 2023. The next dividend payment of 30.5p per share is expected next year. This predicted reward is covered 2.1 times by anticipated earnings.

A reading twice and above gives a decent margin of safety for investors.

BAE Systems also has a strong balance sheet that should help it pay its projected dividend despite disappointing earnings. Abundant liquidity in fact encouraged it to launch a three-year, £1.5bn share buyback program over the summer.

Dividend growth

To find out the exact share price for the past year, visit the historical chart of BAE Systems share price in Euro. Owning income stocks that can raise annual payouts can protect an investor’s wealth from the pressures associated with inflation.

This FTSE 100 stock has raised its total dividend every year since the early 2000s. A strong market outlook and a strong balance sheet indicate payments should continue to grow in the future.

Verdict

Of course BAE Systems stock is not immune to risk. Supply chain is a problem in the industry and this can affect the company’s ability to fulfill orders. It also has to compete with other major US and UK defense businesses for government contracts.

But on balance, BAE Systems is one of the safest FTSE 100 dividend payers. Global defense spending will break £2trn for the first time in 2021, according to the latest data from the Stockholm International Peace Research Institute.

Spending will continue to increase after the Russian invasion of Ukraine as well. And because of its strong relationship with Western governments, BAE Systems can expect orders to continue to rise in the long term. I would love to buy these dividend stocks if I had money to invest.