Boeing Co.: Is BA stock a Top Dividend Growth Stock?
October 28, 2016
BA Stock a Top Dividend Stock with a Bright Future
This year marks 100 years of business for Boeing Co (NYSE:BA), which paid out its first dividend in 1937. Ever since then, Boeing has been a dividend growth stock.
Boeing recently reported earnings of $3.51 per share, blowing past analysts’ estimates of $0.89, thanks to the backlog in the pipeline. The company also revised its guidance, raising it $500.0 million higher, due to quicker deliveries. The higher range and overall revenue for this year is set between $93.5 and $95.5 billion. The backlog for Boeing is $462.0 billion, with more than 5,600 airplane orders. A big and growing part of the company’s revenue is their Global Services and Support segment; compared to the third quarter a year ago, revenue in this segment was up 14%. (Source: “Boeing Reports Third-Quarter Results and Raises Full Year Guidance,” Boeing Co, October 26, 2016.)
BA Stock in a Class of Its Own
Once Boeing sells an airplane, it is not looking at finding new consumers; it is looking for repeat business. After an airline has used the airplane for the allowed time due to regulatory reasons, there are more opportunities for usage of the plane in other capacities. Boeing is the only airplane manufacturer that changes an airplane’s use from a passenger to a freight plane, which extends the plane’s life by 20 years and increases revenue.
The biggest cost for airlines is oil; they can hedge the pricing going forward, but there is still risk involved if the price of oil drops. Boeing has developed and manufactured the “Boeing 777,” which has two-percent better fuel efficiency than other plans. The current target is delivering between 80 and 100 of these airplanes, with the amount likely grow over time.
Boeing will be a huge beneficiary of a greater number of passengers traveling around the world. According to research by the International Air Transport Association (IATA), it is estimated that passengers traveling will touch the 7.3-billion mark, which is double the current number, by 2034. And of course, with an increased demand for airplanes comes more cash back to shareholders. (Source: “New IATA Passenger Forecast Reveals Fast-Growing Markets of the Future,” International Air Transport Association, October 16, 2014.)
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Money Back to Shareholders
Boeing has a strong balance sheet, with $9.7 billion in cash and short-term securities. In the third quarter, Boeing bought back 7.6 million shares, which accounted for $1.0 billion. Since 2010, a total of $22.0 billion has been returned through share buybacks. (Source: Boeing Co, October 26, 2016, op cit.)
And those buybacks are not the only way that shareholders have seen money returned to them, as BA stock is a dividend growth stock that continues to increase its payout. Since 2010, BA stock has seen dividend growth of 260%. The dividend-per-share rate is currently $1.09.
Final Word on BA Stock
Boeing remains a top dividend growth stock and a company that can be owned forever. There are many different divisions within Boeing, such as financing and defense, and the diversity will protect the business if one area sees a slowdown. These divisions currently contribute approximately 30% to the revenue line.
