Why I’d buy the BAE share price for a dependable income stream today

first_imgWhy I’d buy the BAE share price for a dependable income stream today Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Image source: Getty Images. Simply click below to discover how you can take advantage of this. BAE Systems (LSE: BA) released its 2019 figures on Thursday, and confirmed what I’ve always thought. It is one of the most dependable generators of income out there.The annual dividend was raised by 4.5%, to 23.2p per share. It’s now up 11% in four years, since 2015’s payment of 20.9p. In times when inflation is running at under 2%, that’s a very attractive real-terms gain. It’s not massive, but reinvesting real-terms profits over decades can generate serious wealth.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The dividend yield is falling back a little, but that’s for a very good reason — the share price has been gaining. Over the past 12 months, BAE shares are up 43%. And though that’s knocked the forecast 2020 yield back to 3.6%, that’s a cracking total return.VolatilityBut before you go rushing off to buy shares in this potential growth and dividend stock, a word of caution. The BAE Systems share price can be very erratic. The past year has been special, but the gain has really just marked a recovery from a price crash in 2018. Over five years, BAE shares are up a relatively modest 25%.The aerospace and defence business is a fickle one, and I really don’t think it’s one for short-term investors. So if you’re thinking of investing in BAE, I think you need a planned horizon of at least a decade. To be fair, I actually think that of investing in shares generally, but I see it as especially important with such a potentially volatile stock.Modest debtMy main area of concern with so many otherwise attractive companies is debt. So what’s BAE’s situation looking like? It ended the year with net debt of £743m, and that’s only 0.35 times underlying EBITDA of £2,117m. Debt at such a relatively low level is really not a problem.But things are compounded by BAE’s pension fund deficit, which stood at £1.9bn at 31 October. That’s nowhere near the scary levels that the BT pension fund deficit has reached, exceeding £11bn at the last count, but it’s not trivial. BAE had a deficit recovery plan in action that was to run to 2026, but it’s now decided to take a more aggressive approach.A bit more debtThere’s to be a one-off payment of £1bn made in the coming months, funded by debt, with £240m and £250m extra available for the next two scheme years respectively. Some might not like the idea of this extra debt, but I think it’s a good move. For one thing, I see it as a solid ethical step to take, which should help reassure existing and future beneficiaries of the scheme.And BAE can afford to take on the extra debt. Other things being equal, the extra billion would ramp net debt up to £1,743m. That’s still only 0.82 times underlying EBITDA, and most firms would shrug off anything less than 1.5 times as perfectly acceptable. It also combines debt and debt-like liabilities into a higher-profile item that shareholders can monitor more accurately, and I do like openness.In all, the week’s news has reaffirmed my buy stance on BAE Systems. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.center_img Enter Your Email Address Our 6 ‘Best Buys Now’ Shares Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. “This Stock Could Be Like Buying Amazon in 1997” Alan Oscroft | Friday, 21st February, 2020 | More on: BA See all posts by Alan Oscroftlast_img

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