Here’s the BAE Systems dividend forecast for 2023 and 2024

BAE system (LSE: BA.) Shares have been a big investment in recent years. Not only does it provide significant capital gains (approximately 100% in three years) but it also produces growing dividends. Here, I’ll look at BAE Systems’ dividend forecast for 2023 and 2024. What kind of yield can investors expect from the stock going forward?

Good track record

Before making a prediction, you should step back and look at BAE’s dividend track record for context. Here’s a look at the earnings paid by defense companies over the past five years.

year	2018	2019	2020	2021	2022
Dividends per share	22.2p	23.2p	23.7 p.m	25.1 pp	27.0p

The table shows that BAE is a reliable dividend payer. Even during Covid, companies continue to pay (and even increase).

Dividend forecast

As for the forecast, analysts now expect BAE to pay 28.9p per share for 2023. They then expect the group to pay 31.1p per share for 2024.

At current share prices, these approximate payouts translate to yields of roughly 3% and 3.2%, respectively.

It is important to note here that dividend coverage (a measure of dividend safety calculated by dividing earnings by dividends) is expected to be more than two for 2023 and 2024.

This is very encouraging. This high level of coverage suggests that a dividend cut is likely in the near term.

Worth buying?

Is BAE Systems worth buying at current levels with dividend forecasts?

I think. In my mind, it’s hard to think of a more secure industry than defense today.

With so much geopolitical tension around the world (Russia/Ukraine, China/Taiwan, etc.), the government’s commitment to defense will remain strong in the coming years.

So the backdrop for BAE is very supportive, in my opinion.

It is worth noting here that in full year 2022 results, BAE said it had a huge order backlog of £58.9bn.

And management is very optimistic about the future.

“For 2023, we predict higher growth, continued margin expansion, higher EPS and we also increase our continuous three-year cash target, all of which indicate that our business is growing momentum in the future.“said Group Finance Director Brad Greve in the full year results.

As for the stock price, it still seems reasonable to me. With analysts expecting earnings per share of 59.1p for 2023, the price-to-earnings (P/E) ratio is expected to be around 16.5.

That is higher than the UK market average, but not higher.

Of course, defense spending may not be strong forever. It can experience a downturn at some stage. This could impact BAE’s prospects.

But, for now, the outlook is healthy. So I think BAE Systems is worth buying.