LONDON -- BAE Systems (LSE: BA) (OTC:BAES.Y) is the £12 billion U.K. defense firm behind some of the most ambitious projects in the world. One of the company's biggest current jobs is the manufacture of the U.K.'s next aircraft carriers.

Revenues at BAE are split between manufacture of new equipment and service. Whereas manufacturing orders are notoriously "lumpy", the high customer quality and long-term nature of service contracts brings a high degree of earnings visibility to BAE's business. Currently, around 50% of BAE revenue comes from ongoing support.

Today, BAE shares trade on nine times forecast earnings for 2013. A slight earnings dip is expected in 2014, pushing the price-to-earnings (P/E) ratio to 9.2 times forecast earnings. This puts BAE Systems among the 10 cheapest shares in the FTSE 100 today.

The company's size and strong cash flows mean that it passes many additional value criteria beyond a simple P/E test.

BAE Systems has increased its dividend to shareholders every year since 2004. In the last five years, the payout has increased at an average rate of 8.8% per annum. Fewer than one in four FTSE 100 companies can boast a better recent dividend record than BAE.

Last year's dividend payout of 19.5 pence per share equates to a yield of 5.2%. Analysts expect that the payout will increase slightly this year and again for 2014.

Today, the shares trade on a forecast yield for 2013 of 5.3%, rising to 5.5% next year. That is the highest dividend yield that the shares have traded on in the last 15 years.

The high prospective yield puts BAE Systems in the top 10 FTSE dividend payers.

You might think that the low P/E and high forecast yield are the result of a depressed share price. You'd be wrong. BAE Systems are up more than 20% in the last six months. Today, BAE is just 5.2% off a 52-week high. In the last 12 months, the shares have outperformed the FTSE 100 by 14%.

The awakening of the share price will have investors wondering if BAE could head back to test its five year high of 480 pence. With the shares today trading at 376 pence, that's a sufficiently attractive outcome to warrant further research.

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