BAE Systems

BAE Systems is a UK defense company and one of the largest defense contractors in the world. It builds combat aircraft parts and systems, warships and submarines, armored vehicles, artillery and ammunition, electronic warfare systems, and cyber and intelligence services. Its largest customers are the governments of the US, the UK, Saudi Arabia, and Australia. In the US, it works mostly through BAE Systems, Inc., which makes electronics such as the F-15EX warning system and vehicles such as the Amphibious Combat Vehicle.

It makes money from long-term government contracts, which often give advance payments and steady cash flow. In the first half of 2026, sales were £15.8 billion, and its order backlog reached a record £84.0 billion at June 30, 2026. The American Depositary Receipt (BAESY) trades in the US and represents ordinary shares listed in London.

The market prices BAE Systems at a discount because it doubts that government defense budgets will grow as fast and as long as the backlog suggests. The shares fell about 20% from their March 2026 high, while the business kept growing. In the UK, the budget on October 28, 2026 fully funded the Defence Investment Plan, including a £4.7 billion gap, and set 2030 as the target date for defense spending of 3% of GDP. But the government will say how it pays for the 3% only at the Spending Review in 2027.

Talk of peace in Ukraine has also made defense stocks fall before. For the gap to close, three things must be true. BAE must meet its raised 2026 guidance: sales growth of 8% to 10%, underlying EBIT growth of 10% to 12%, and free cash flow above £2.0 billion. Order intake must keep the backlog near its record of £84.0 billion.

The 2027 Spending Review must fund the path to 3% of GDP, and US and European budgets must keep orders for munitions, ships, and electronics high. The next checks are the full-year 2026 results, expected in February 2027, with the 2027 guidance, and the UK Spending Review in 2027. If budgets hold, the gap can close over the next four to six quarters. If governments delay spending, the discount can last longer.

1. Oct 28, 2026Passed

   UK budget: defense fundingA budget that fills the £4.7 billion Defence Investment Plan gap or sets a path to 3% of GDP passes; a budget that leaves the gap open fails.Outcome: The budget fully funded the Defence Investment Plan, including the £4.7 billion gap, and set 2030 as the target date for 3% of GDP.
2. Feb 18, 2027 · est.Pending

   FY 2026 results and 2027 guidance2026 sales growth of 8% to 10%, free cash flow above £2.0 billion, and 2027 guidance for more growth pass; results below guidance or flat 2027 guidance fail.
3. 2027 · est.Pending

   UK Spending Review: path to 3% of GDPA Spending Review that funds defense spending of 3% of GDP by 2030 passes; a Spending Review that delays the funding or the 2030 date fails.

Every passed and failed checkpoint across all picks

• October 28, 2026The UK budget fully funded the £15 billion Defence Investment Plan, including £4.7 billion that had no funding before. Other departments give up part of their capital budgets to pay for it. The government set 2030 as the target date for defense spending of 3% of GDP, but it will say how it pays for this only at the Spending Review in 2027. The National Wealth Fund and the British Business Bank will also put up to £5 billion over 4 years into defense and related sectors.
• October 19, 2026BAE Systems and the US Department of War signed a seven-year framework agreement to make up to 25,000 APKWS laser-guidance kits a year. Production capacity can grow to 35,000 kits a year if allies order more. The agreement is not a purchase order. Congress must approve and fund the purchases, and the two sides did not give a value.
• October 6, 2026The Times reported that the UK government may delay its decision on how to raise defense spending to 3% of GDP, possibly to a Spending Review in October 2027. The Treasury said that the date of the Spending Review is not set and called the report "pure rumour and speculation".

• BAE Systems depends on government budgets. A delay in the UK path to 3% of GDP, which the government will fund only at the 2027 Spending Review, or a change in US budget priorities can slow new orders.
• Peace talks in Ukraine or a lower threat level in Europe and the Middle East can lower the price that investors pay for defense stocks, even if contracts stay in place.
• Large programs, such as submarines and warships, are complex and long. Cost overruns or delays on fixed-price work can reduce profit.
• Sales to Saudi Arabia and other export customers depend on government export licenses and politics. A change in UK or US export policy can stop deliveries.
• BAE reports in pounds, but a large part of its profit is in US dollars. A weaker dollar lowers its reported sales and profit, and the ADR price also moves with the exchange rate.

BAE Systems funds itself mostly with bonds and with advance payments from government customers. At June 30, 2026, loans and overdrafts were £7.4 billion, of which £0.7 billion was current, and cash was £4.2 billion. Read more

Yield at the current rate

2.0% (current annual rate, at today’s price)

Dividend yield

2.0% (last 12 months, at today’s price of $102.14)

Paid per share

$2.009 in the last 12 months (2 payments)

Current annual rate

$2.009 (the last two payments)

Latest ex-dividend date

October 23, 2026, $0.794 per share

Dividends per share by year

From 2020 to 2025, the dividend grew by about 7.9% a year. From 2015 to 2025, the dividend grew by about 3.2% a year.

Source: company filings and market data, read on November 13, 2026. The ex-dividend date is the first day a buyer no longer gets the next payment.