Dividend Farming Scorecard: Boeing Company (BA)

Although I’m a Dividend Farmer I’m also an aerospace enthusiast and pilot.  Boeing’s been in the news recently, for all the wrong reasons, but it’s an interesting company to me so I thought I’d take a look at it while it may be under duress.

The table below provides a summary of factors I’m scoring for BA as of March 27, 2019.  Laying out my analysis like this helps me quickly benchmark an opportunity against target metrics.  It also allows me to quickly compare this firm to alternatives as part of my screening process.

FACTOR	METRICS	BOEING COMPANY
CCC List	Champion	Challenger
Current Yield	4.0%	2.2%
Company Profile	Red Flags?	Aerospace & Defense Recent crashes.
Industry Leadership	Top 10	1st
Market Cap	$10 B+	$211.2 B
P/E	< 20	20.9
P/B	< 2	626
Debt / Equity	< 1	345
Dividend History (Years)	25	8
12 Month Price Range	Lower Half	Upper Half (barely)
Dividend Payout Ratio	< 75%	38.3%
Portfolio Weight	Slightly Over	Under

CCC List: The DRIPinvesting.org web site provides the list of Champions, Contenders, and Challengers where I normally start.  Boeing Company has a fairly short record as a Dividend grower – only 8 years - which doesn’t present much of a launch. 

Current Yield:  BA’s yield is 2.2% as of this writing, but historically runs under 2%.  It’s currently paying over $8 a share in dividends but with a share price of nearly $375 it stands well outside my price range.  At that level, BA would have to pay an annual dividend of nearly $15 to approach my 4% target yield.

Company Profile:  BA is one of the Big 2 manufacturers (with Airbus) of wide body commercial aircraft and a leading aerospace and defense firm involved in U.S. Air Force aircraft production to space launch activities.  Barriers to entry in this space are high, but so is the cost of doing business – even for the established.

Industry Leadership:  Skift.com ran a Bloomberg article in January 2019 indicating Boeing was the world leader in commercial aircraft production.  BA was also the largest of the aerospace and defense firms found on the 2018 Fortune 500 list.  Being #1 has its advantages but I’m not taking that position for granted.

Market Capitalization:  At $211 billion and change, market cap size is without question.  A good sign on this Scorecard for BA.

Price to Earnings:  The trailing P/E at just over 20 is about a thread’s width outside my range.  It’s close enough for that metric to be anything but a show stopper.  However, other metrics must show well.

Price to Book:  The P/B ratio of 626 with a book value per share listed at $0.60 according to Yahoo Finance puts this issue to rest.  At no point in a value investor’s career could an investment at that level be warranted.  Not while sober and conscious. 

Debt to Equity:  Debt is 345 times the equity.  Although unlikely, should BA ever fold I would be fortunate to get a couple aircraft rivets in return.

Dividend History:  A dividend growth history of 8 years is better than nothing, but not better than a lot of alternatives with superior metrics.  BA’s grown its dividend aggressively over the past 3 to 5 years, but that’s not enough for this Dividend Farmer.

Price Range:  The price is nearly in the center of its trailing 12-month range - $65 below its top end and roughly $70 above its low for the year.  Considering the fallout from the two 737 Max crashes, an Air Force contract snafu, and a Southwest engine incident recently, its position nearly midway between the high and low points strikes me as amazing.  The decline is roughly 15% but I would have assumed the loss to be greater given setbacks with its 737 series which is the longest selling, highest volume commercial aircraft in the world.

Payout Ratio:  The payout ratio at 38.3% is solid.  It leaves a lot of room to grow, but at current rates it would take several years to reach the appropriate yield range.  Alternatively the price would have to be beaten down further still, which is unlikely.

Portfolio Distribution:  BA would be my only aerospace holding.  I’d love to have an aviation blue blood within the portfolio, but won’t put one there unless the scorecard is solid – or the price is extremely attractive and I have money I don’t mind losing.  Also unlikely.

Analysis  

BA missed on over half my benchmarks.  It wasn’t within Saturn V range of P/B or D/E and out of bounds on four others with short-term red flags prominent.  UTX and GD would be superior opportunities.  Although Boeing is likely to rebound from its current problems and provide a nice price run for those jumping in now, a Dividend Farmer isn’t looking for appreciation without a solid dividend and healthy financials.  BA doesn’t provide that.   

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.