Boeing (NYSE:BA) has received a “buy” rating from as many as 24 analysts who believe it is good time to invest in the stock. The American aerospace major is leaving no opportunity in delighting and maximizing value to its investors. It posted a fantastic quarter with record backlog a couple of months back thrashing Street expectations.
Not just this, the company’s order backlog is mounting every month. Last December Boeing announced a 50% hike in dividend to reward its shareholders. Now it’s come out with another pleasant announcement particularly for value investors.
The Good News
Research analysts at RBC Capital target that Boeing share price would hover around $145. While analysts at Sterne Agee have set a target price of $164 a share after they gave a buy rating to the Chicago-based major. So what’s the good news that made analysts give the buy rating?
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- BA 15-Year Financial Data
- The intrinsic value of BA
- Peter Lynch Chart of BA
On Monday, June 23, the company declared its quarterly dividend. Company shareholders would receive $0.73 a share on September 5, which translates to a dividend of $2.92 a share and a yield of 2.23%.
The company had released its latest quarter results on April 23, when the aircraft manufacturer earnings per share of 1.76 beat consensus estimates of $1.56. On an average, analysts predict Boeing to register annual earnings per share of $7.63 for the current fiscal year. Boeing’s payout ratio is pretty low, and this is exactly what gives the aerospace giant the luxury of making higher dividend hikes. According to Morningstar, Boeing has maintained an average payout ratio of 40.46% in the past 10 years, which is quite a safe one.
This means that even in years of profit drought, the company will be able to feed its investors with regular dividend payments. This is exactly what happened in 2009 when the company saw a drastic fall in earnings per share. However Boeing comfortably managed to pay a dividend of $1.68, 5% higher than the previous year.
More Reasons to Rejoice
The company is growing stronger fundamentally, and with rising demand for fuel efficient aircraft Boeing looks good to deliver. The company’s revenue growth outpaces the industry average of 3.2% - credit goes to the higher deliveries of 161 jets. The company has increased its production rate of aircraft as well, which would help it convert and deliver orders quickly and on the scheduled date. This also means that Boeing is increasing its capacity so that it can take more orders comfortably.
The plane maker’s net operating cash flow also improved significantly by an astounding 112.2% to $1.1 billion. This reflects the strength of Boeing’s operational performance. To grow even stronger and contest archrival Airbus (EADSY), the company is constantly working on launching re-engineered jets – the 737 Max and the 777X. Both the jets are its top selling models and are gaining tremendous orders. The 787 is another solid wide body program of the jet maker. Though the 787 Dreamliner has drained huge cash due to technical snags, the company has huge hopes tied to this project and believes it to add to its profits.
With the company moving in the right direction, shareholders could stay assured of future growth and higher dividend payment. Boeing has been one of the favorite dividend stocks of value investors and could continue to be so. Rising demand, remodeling products, and increasing production rate suggest even better times ahead. All this should improve earnings and dividend, making Boeing investors’ perfect “forever stock.”