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BAE Systems (LSE:BA.) shares have been steadily climbing in recent years. The company’s share price is sitting at 1,276p with a market cap nearing £39bn.
BAE is one of the world’s largest weapons and aviation groups and generated over £23bn of revenue last financial year. Operating in almost 80 countries, the group supplies a significant number of fighter planes, radar, attack missiles, warships, and munitions.
It’s no secret that geopolitical tensions have been rising across the world. There are a number of conflicts across the globe at present. There are also at least 70 countries holding elections this year, including major players like the US, UK, and Indonesia.
This backdrop has been good for BAE Systems shares in recent years. But just how much would a £10k investment 10 years ago be worth today?
£10k invested in BAE Systems shares in 2014
A time before Covid-19 and TikTok. July 2014 was also when BAE Systems shares were changing hands for just 418p.
£10,200 invested in BAE back then would have yielded a total of 25 shares. Given the recent share price performance and strong dividends, that would have netted a pretty tidy gain for a buy-and-hold investor like myself.
In fact, BAE Systems shares have climbed 204.5% higher since then. However, the defence group has a dividend yield of 2.4% right now, so the full picture should assume reinvestment of any dividends.
Over the last decade, dividends reinvested would contribute a further 142% for investors. Putting it all together, that means a whopping 346.5% total return in just 10 years. That’s an average annualised return of 16.1% over the last decade.
What does it mean for a £10,200 investment 10 years ago? Well, that nest egg would be worth a tidy £45,543 today. Not bad for just a decade of investment.
Looking ahead
I wish I had a time machine to go back 10 years ago and buy BAE shares. However, that isn’t possible (yet!). That means I’m looking to the next decade as a long-term investor.
One thing about markets is that they’re always changing. The next decade could be the same, better, or worse for the multinational defence and aviation group.
I do like BAE Systems’ prospects given rising geopolitical tensions and increasing commitments from governments towards national security. The company also has offerings in a number of growing areas including cybersecurity.
However, there are plenty of risks too. Resolution of major conflicts (e.g., Ukraine-Russia) could see a shrinking forward order book. There’s also the risk of losing contracts or potential liabilities that could impact future cashflow.
I don’t know where BAE Systems shares are headed in the next decade, but I think shareholders would welcome another 346.5% total return by 2034.
