So far, 2019’s proven to be a year to remember for BAE Systems (LSE: BA). A 23% share price rise since the turn of January would be toast-worthy, even during stress-free times.
For the FTSE 100 stock to punch such gains following a German export ban on arms sales to Saudi Arabia, one which has cast doubt on the future of its money-spinning Typhoon aircraft agreement with the Kingdom, is particularly impressive.
Why have BAE Systems shares risen, then? It’s quite simple — defence companies are classic safe havens in times of severe macroeconomic and geopolitical tension like these, that’s why.
So it’s quite possible investor demand will continue to swell into 2020 as US-Chinese trade wars, worsening economic data from across the globe, and concerns over where Brexit will lead to likely persist, to name just a few of the issues on investors’ minds right now.
Not that BAE Systems is just a solid near-term punt, however. It’s my belief the armsbuilder will remain a critical supplier in the Middle East for many years to come, as I’ve said before. And, thanks to its broad range of cutting-edge weaponry, it should remain a top supplier to the US and UK militaries too.
One final thing. At current prices, the London business sports big dividend yields of 4.1% and 4.2% for 2019 and 2020, respectively. I think it’s a white-hot buy right now.
The right medicine
AstraZeneca (LSE: AZN) is another Footsie share that’s really got the wind in its sails right now. Its share price is also up around 20% so far in 2019, on the back of a flurry of strong pipeline developments — the most recent being the strong testing update for its Lynparza cancer drug this week — as well as its position in a classic defensive sector.
Look, I know the unpredictable nature of drugs creation can be a disaster from an investment perspective. Disappointing testing data can lead to lost billions through product launch delays with additional R&D costs.
I have faith, though, that the huge investment AstraZeneca’s made to transform its R&D operations over the past decade should set it on course to create some serious profits growth in the years ahead. Medicine development has certainly been impressive of late, the business watching new medicine sales rocket 66% year-on-year in the six months to June to $2.4bn.
Profits are poised to rocket
On the back of this, City analysts expect earnings growth to start accelerating from here, with a 1% predicted increase for 2019 expected to rev to 11% in 2020. Given the rate at which its products are flying off pharmacy shelves all over the world, I wouldn’t be shocked to see next year’s estimates receive some serious upgrades.
And here’s an added bonus. With the full-year dividend expected to remain locked at 280 US cents per share, at current prices AstraZeneca offers an inflation-beating dividend yield of 3.3% through 2020.
It may not carry the near-term yields of BAE Systems, but I consider it to be another hot blue-chip buy right now. Particularly as its improving profits outlook likely leads to a resumption of its progressive dividend policy in the not-too-distant future.