The Boeing Company (BA) hikes dividend by 30% & Remains in our Top 100 List

Boeing’s (NYSE:BA) dividend was increased by an incredible 30% this week. Its overall yield is 3.63%. The firm started paying a dividend in 1993.

Boeing is one of the largest manufactures of commercial airplanes and defense products in the world. The firm is headquartered in Chicago. Commercial aircraft accounts for over 70% of revenue.  The firm operates in five segments: Commercial Airplanes, Boeing Military, Global Services & Support, Boeing Capital, and Network & Space. The company was founded in 1916.

Boeing has maintained a solid three-year growth rate of dividends of 31.7 percent. Boeing currently ranks 1st in yield within the large cap aerospace-defense, major diversified category. The quarterly dividend for the February payment will be $1.42 versus the prior year rate of $1.09 per share. The Boeing Company is a member of our Top 100 Dividend Stock List (see below).

top-100

The dividend will be paid at the new higher rate on March 3, 2017, to shareholders of record at close of business on February 10, 2017. Boeing is currently priced at $156.66. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
2/10/2017 1.42
11/8/2016 1.09
8/10/2016 1.09
5/11/2016 1.09
2/10/2016 1.09
11/4/2015 0.91
8/5/2015 0.91
5/6/2015 0.91
2/11/2015 0.91
11/5/2014 0.73
8/6/2014 0.73
5/7/2014 0.73
2/12/2014 0.73
11/6/2013 0.485
8/7/2013 0.485
5/8/2013 0.485
2/13/2013 0.485
11/7/2012 0.44
8/15/2012 0.44
5/9/2012 0.44
2/8/2012 0.44
11/8/2011 0.42
8/10/2011 0.42
5/11/2011 0.42
2/9/2011 0.42
11/3/2010 0.42
8/4/2010 0.42
5/5/2010 0.42
2/3/2010 0.42


Quantitative
 Analysis:

We examine Boeing upon our five key criteria, which include; 

Category Value Score
Dividend Yield 3.63% 83
Dividend Growth (3 to 6 year avg) 25% 59
Forward P/E 16.46  129
S&P Financial Rating A 120
Beta  1.05  150
Total Score   541

Additional quantitative information on P/S ratio and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr lowest Yield % 5 yr max Yield %
3.63% 31.7% 18.3% 154.90 1.01 0.55 1.25 1.36% 3.75%

Positives;

  • Boeing maintains an investment grade credit rating and a current dividend yield (3.63%) is well above the market and near its five-year maximum.
  • Boeing has maintained a three-year growth rate of dividends of 31.7 percent.
  • Boeing’s dividend yield is above that of the S&P 500 Index.

Negatives;

  • Boeing maintains a beta of 1.05, higher than the average company.
  • Boeing is trading above its ten-year average price/sales (P/S) ratio.

Latest Earnings & Overall Analysis:

Boeing issued its earnings data on October 26th. The company reported $3.51 EPS for the quarter, beating the consensus estimate of $2.62 by a remarkable $0.89. But overall it was a very mixed Q3 2016 with the defense segment suffering double-digit fall in revenue. The company’s overall revenues amounted to $23.90 billion. In the commercial airplane division, the firm had a 4% fall in revenues to $16.97 billion.  Weaker deliveries were the cause of the miss.  188 commercial airplanes were delivered in Q3 due to stagnant demand for its 737, 777 and 787 Dreamliner product.  Shipments of the 777 airplane were weaker than the 787.  Boeing delivered 22 of the 777 line versus 27 in last year’s Q3 period. On the positive side, Boeing got new orders for 107 planes during the quarter.  Its product backlog in the commercial airplane division is now nearly 5,600.

In the Defense segment, there was a 10% fall in quarterly revenues $7.51 billion year-over-year.  Boeing delivered 19 AH-64 Apache helicopters, 14 Chinook helicopters,  6 F/A-18 jets, 4 F-15s, and 3 satellites. Network & Space maintained poor results, with revenue dropping by nearly 20%. Boeing Capital results were also below par with revenue of $63 versus $114 million in Q3 2015. As for its capital position, Boeing has cash and cash equivalents of $9 billion.

Despite several misses on revenue and plane deliveries, Boeing actually increased its earning per share projections for full-year 2016 to the range of $6.80–$7.00. This was much higher than expectations of a range of $6.10–$6.30.   Revenue projections were also incrementally increased with guidance at $93.5−$95.5 billion, up from $93−$95 billion. Research & Development for 2016 is to remain at nearly $5 billion.

But a dose of reality set in during December. Boeing just announced that it is cutting its 777 production rate to 5 per month effective August 2017 from 7 per month. The company indicated there are not enough pipeline order of their popular 777 widebody jet.   Furthermore, no 777X jets will be delivered until after 2020. Its an amazing transition. Earlier this year, Boeing was producing over 100 777s per year. Then the cuts continued throughout the year, down to 7, then 5.  Thus most analysts project that Boeing will now produce less than 50 777s in 2018, a big blow to the company that resulted in new layoffs.

Much of the loss of future production is from competition from Europe’s Airbus. The competitor has a new A350-900, which has drawn favorable reviews.  As overall orders are drying up, Airbus is now competing head-to-head for what orders remain. One caveat is Iran, that wants to purchase  15 777s.  If the deal can go through with all the political ramifications, it could produce a stopgap for Boeing.

Overall, Boeing is a very solid company with a strong balance sheet, high relative dividend, strong dividend growth, and moderate price/earnings ratio.  It does have potential problems with aircraft segment with lowered orders. However, with the strong dividend increase and new $14 billion buy back program, the firm remains committed to returning cash to shareholderes. Although we expect earnings numbers to come down in the next few weeks, Boeing should still clear $7.50 in 2017 and $8.00 in 2018 even with the lowered plane production guidelines.

 

 

Based on the firm’s high dividend yield, strong dividend growth, and investment grade rating, Boeing remains as a member of our  Top 100 Dividend Stocks at #56. 

The Boeing Company Dividend Yield Chart (Click to enlarge)

ba2

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years.

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