Shares in this FTSE 100 growth stock have jumped 27.09% in the last six months. Over one year, they’re up 35.66% and 159.9% over five years. It’s not just one of the best performers on the index, it’s one of the most consistent too.
This globally-focused British company boasts a record £69.8bn order book, after taking another £37.7bn of new orders in 2023 (also a record).
This company is flying
It posted sales of £25.28bn last year and expects them to rise 10-12% this year. Countries are clamouring for its products, with the US generating almost half of its revenues and, sadly, demand can only rise and rise.
I say sadly because the company in question is weapons manufacturer BAE Systems (LSE: BA) and its success is a sign of the times we live in. It’s the ultimate defensive stock.
BAE Systems is a pretty good dividend stock too. Today’s 2.44% yield may be well below the FTSE 100 average of 3.9%, but that’s partly a consequence of its skyrocketing share price.
Management policy is progressive. On Wednesday, when the group published its full-year results for 2023, it announced an inflation-busting 11.1% hike in its annual dividend to 30p a share.
No dividend is guaranteed, but few look more solid than this one, with free cash flow up by a third to £2.59bn. Last August, it announced a further $1.5bn share buyback programme too.
When BAE Systems wins a new contract, it’s often big and last for years. In December, for example, it secured a 10-year deal worth up to $8.8bn to manage the US Army’s main ammunition plant in Tennessee.
The war in Ukraine has exposed the West’s shortage of artillery shells, missiles and other weapons. BAE’s biggest challenge looks like keeping up with demand.
It also makes submarines, frigates, jets, electronic warfare systems, combat vehicles, and much more. In consequence, many overlook its aerospace division, which will expand through its $5.5bn acquisition of US-based Ball Aerospace.
Time I bought this FTSE 100 hero
The only thing that baffles me is why didn’t I buy the stock years ago? My first response is, well, nobody’s perfect.
The second is that I’ve been targeting dirt cheap, high-yielding dividends stocks, which I hope will rebound when interest rates fall and the economy recovers.
Finally, I’m a bit wary of momentum stocks, in case I buy them just as they run out of road. I thought I’d missed my chance with BAE Systems, but history shows I was wrong. So should I buy it today?
I’ve pointed out all the positives. As with any stocks, there are risks. Future growth may be priced in, with a valuation of 19.4 times earnings. That’s roughly double the FTSE 100 average of 9.9 times.
Net debt is forecast to rise from $1bn to $6.11bn in 2024, mostly due to the Ball Aerospace deal. However, that looks unproblematic given the company’s strong fundamentals. Another risk is that peace could suddenly break out, hitting demand (stop laughing at the back).
There may be other no-brainer buys on the FTSE 100 (BP? RELX? Sage Group?) but I can’t see any to match BAE Systems. I’ll buy it the moment I free up some cash, no further thought required.
The post Is this stellar dividend growth stock the only no-brainer buy on the entire FTSE 100? appeared first on The Motley Fool UK.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems, RELX, and Sage Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
