Is the BAE share price about to take off?

When it comes to FTSE 100 stocks, I think the BAE (LSE: BA) share price stands out for its incredibly unique qualities. 

The global defence contractor is a one-of-a-kind in the UK market. It is the country’s largest defence company, and it has a global footprint with operations spanning as far as Australia. The company also has several other unique qualities that could help it outperform in an uncertain economic environment. 

BAE share price advantages

The defence industry is far more defensive than other sectors. Its primary customer tends to be the government, which has deep pockets and can sign multi-year contracts. Governments are the only real customers these companies can sign deals with in most situations. 

Unfortunately, this sector is also highly regulated. This means corporations like BAE do not have much flexibility in finding customers and signing international agreements. They have to follow many rules and regulations, and breaking these can result in severe financial penalties. 

Despite this challenge, the group’s defensive nature suggests the BAE share price could outperform the market as economic uncertainty builds.

According to the company’s latest update, its order backlog for the next few years stands at over £40bn, which locks in around two years of revenue for the group. The organisation is always looking for new opportunities, suggesting this backlog will only continue to expand in the years ahead.

BAE also has an advantage when it comes to technology. The company has developed some of the most advanced tech globally for the defence industry. This gives it a solid competitive advantage. 

Uncertainty grows

These advantages are just some of the reasons why I think the BAE share price could take off over the next few years. Governments worldwide are ramping up military spending, and one of the primary beneficiaries of this spending will be defence contractors. 

As one of the largest defence contractors in the world, with its portfolio of unique technologies, I think BAE will almost certainly benefit from this increased spending. The company is already returning significant amounts of cash to investors.

It has been repurchasing shares, and the stock currently offers a dividend yield of 4%. Considering the outlook for the organisation, I think it is likely management will continue to increase the dividend payout and other shareholder returns in the years ahead. 

Of course, dividend growth is far from guaranteed. If BAE finds itself on the wrong side of regulators and politicians, the company’s outlook could change overnight. This is something I will be keeping an eye on as we advance. 

Nevertheless, as the outlook for the global economy and geopolitical environment becomes more uncertain, I believe BAE can provide a safe harbour in stormy waters.

Considering its defensive nature and current dividend yield, I would buy the stock for my portfolio today. I cannot guarantee that the shares are about to take off. But I think there is a good chance they could outperform as uncertainty builds.

Rupert Hargreaves 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.