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Defence giant BAE Systems could be a dividend ace

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Defence giant BAE Systems has come in for its fair share of backlash in the wake of the murder of journalist Saudi Arabian Jamal Khashoggi in Turkey last year. Fears of a global clampdown on arms trade with Saudi Arabia – where BAE generates 15% of its revenue – have caused a big sell-off in the company’s share price. But this certainly isn’t the first time that geopolitical tensions have dampened the outlook for the company, which always manages to come through its problems – 20 years without a dividend cut is proof of that.

Mark Twain’s adage, "history doesn't repeat itself, but it often rhymes" could be a motto for long-term income investors. BAE Systems (BA) is a case in point. Although it nearly always appears to be facing a problem that might threaten its earnings, history shows that this business hasn't cut its dividend for 20 years and has an impressive track record of shareholder returns.

Last year, the company was one of the UK’s highest yielders whose dividend was covered at least twice by earnings. So, will the future of BAE continue to rhyme with its past? We think it's very likely.

IS BAE the ultimate defensive buy?

The defence giant is more diverse than many critics realise. High profile products such as the Typhoon aircraft and naval ships account for a sizeable proportion of revenue, but the group also produces a wide range of other military systems, including weapons, vehicles, communication and surveillance systems.

Less than half of BAE's 83,000-strong workforce is based in the…

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