LONDON -- The shares of BAE Systems (LSE:BA) bounced 10p, or 3%, higher to 343 pence during early London trade this morning after the defense contractor lifted its annual dividend by 4%.

BAE today declared a full-year payout of 19.5p per share compared to 18.8p per share last year.

The dividend lift accompanied 2012 results that showed sales falling 7% to £17.8 billion and underlying operating profits falling 6% to £1.9 billion.

BAE cited lower volumes within its land and armaments division and a lack of aircraft deliveries under the Salam Typhoon programme for the reduced performance.

The Salam Typhoon program concerns an order of 72 Eurofighter Typhoons for the Royal Saudi Air Force, the requirements of which were changed during 2011 and have since prompted protracted price negotiations.

BAE also said today that its order backlog had improved by 8% to £42bn and confirmed net debt of £1.4bn had transformed during the year into net cash of £387 million.

In addition, the FTSE 100 member stated it would initiate a three-year, £1 billion share buyback programme, the full implementation of which would be subject to a satisfactory resolution to the Salam Typhoon discussions.

Looking ahead, BAE reckoned 2013 could see "modest" growth in underlying earnings per share. The company also claimed a satisfactory outcome to the Salam negotiations would add 3p per share to underlying earnings.

However, BAE did caution that its forecasts were at risk from US budget reductions and "indiscriminate funding cuts."

Still, based on today's figures, BAE's shares trade on a P/E of 9 and offer a yield of 5.7%.

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Maynard Paton has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.