Dividend Farming Scorecard: Aerospace Comparison (UTX, GD, BA)

As a fan of the aerospace field I’ve looked at three of the major players in the industry since January.  Below are side-by-side comparisons of United Technologies (UTX), General Dynamics (GD), and Boeing Company (BA).

Charts like this are handy methods for sifting through multiple options quickly to filter the true opportunities from those that just won’t fly.  Although each has issues that may prevent a Dividend Farmer like me from investing, only BA is totally off the table.

FACTOR	TARGET METRICS	UNITED TECHNOLOGIES	GENERAL DYNAMICS	BOEING COMPANY
CCC List	Champion	Champion	Champion	Challenger
Current Yield	4.0%	2.45%	2.4%	2.20%
Company Profile	Red Flags	Treasury Stock?	Aerospace and Defense	Recent crashes.
Industry Leadership	Top 10	#3	#4	#1
Market Cap	$10 B+	$99.9 B+	$42.7 B	$211.2 B
P/E	< 20	17.8	15.4	20.9
P/B	< 2	2.5	3.6	626
Debt / Equity	< 1	1.1*	2.1	345
Dividend History	25 Years	25	27	8
12 Month Price Range	Lower Half	Top 10%	Bottom Quartile	Upper Half
Dividend Payout Ratio	< 75%	44%	35.30%	38.30%
Portfolio Weight	Slightly Over	Under	Under	Under
DATES		1.25.19	1.06.19	3.27.19

It’s possible an investor may look beyond the first three items.  For instance, an aggressive dividend growth trend coupled with a low payout ratio might shore up the low yield within a year or two.  Recent crashes are in receding in the rearview mirror and will be forgotten by Mr. Market before you can say ‘cleared for departure’. 

However, once a value investor gets to the Price-to-Book and Debt-to-Equity figures relative to UTX or GD, the game’s over.  Those figures aren’t going to correct to an acceptable level in the foreseeable future – if ever.

Although barriers to entry are high, which is good as far as investors are concerned, the aerospace segment carries inherent risk given the cyclical nature of the airline industry.  Add to this the potential for news-making catastrophes driving Mr. Market into an uncontrolled spin and there’s no need to add more risk with value metrics as far off the market as BA’s.  The upside isn’t there.

Analysis  

As mentioned in the original Boeing Scorecard, the recent 737 Max crashes may result in a buying opportunity for momentum investors or frequent traders looking to ride a wave for short-term gains.  I’m looking for something to hold for the long haul that provides an adequate return while minimizing risk to an acceptable level.  UTX and GD in that order are still investment options for the farm.  This is particularly true given the lack of aerospace or manufacturing in my portfolio.  As much as I admire Boeing’s products and history, this Dividend Farmer won’t be buying an BA.   

The thoughts and opinions expressed here are those of the author, who is not a financial professional.  Opinions expressed here should not be considered investment advice.  They are presented for discussion and entertainment purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.