Today we're going to take a quick look at Boeing not from the perspective of whether it's a successful business (which it clearly is). Instead, we'll be asking whether Boeing stock is likely to turn into a successful investment for small investors like you and me.
In short, is Boeing stock one you can ride to riches? Let's step into the cockpit and see.
They like you! They really like you, Boeing!
There are a lot of good reasons to think that Boeing stock will remain popular with -- and reward -- investors over the long term. Reason No. 1: The fact that Boeing planes are so popular with fliers. Last year, flyer information website Airfarewatchdog.com released a survey of 1,000 frequent fliers, asking them which planes, out of all the planes built by all the manufacturers in the world, they most enjoy flying on. The result was "Boeings," by a nautical mile.
According to Airfarewatchdog, nearly three in four respondents polled said they'd rather travel with Boeing than in competing models from Boeing rivals Airbus or Embraer (NYSE: ERJ ) . Indeed, out of the top seven planes ranked by fliers, six of them were Boeings. Here they are in order:
- Boeing 777 (in first place)
- Boeing 747 (in second)
- The Boeing 787 Dreamliner (skipping a beat to land at fourth place)
- And followed in quick succession by the Boeing 737, 767, and 757, in that order
Boasting a product catalog that includes both the world's "fastest selling" airplane in history (the 787) and also its "best selling" airplane over time (the 737), it's no wonder that Boeing got some planes on Airfarewatchdog's list. But six out of the top seven?
That doesn't happen by accident. And it bodes well for Boeing's continued success in the future.
Boeing is winning the orders race, and the deliveries race, too
As long-term investors, we like to invest in companies that succeed over the long term. And Boeing, whose roots stretch back nearly a century to its founding in 1916 (let's give a nod here to S&P Capital IQ for supplying the date), has been a star of the aerospace and defense industry for a very long time. But there's also good reason to expect Boeing stock to succeed in the short and medium term as well -- time frames more relevant to today's investors.
How do we know this? Because every month, Boeing and Airbus provide investors with near real-time updates on how their businesses are going -- and at last report, Boeing was winning. Big time.
The most recent data show that when Boeing is beating Airbus on both new orders received this year, and deliveries of aircraft ordered in years past. Through the end of July, Boeing added 783 net new orders (that's "gross" orders minus cancellations) to its order book for 2014, versus only 705 net new orders for Airbus, eclipsing its rival by 11%. Boeing has also delivered 400 planes to its customers so far this year -- 14% more than Airbus can boast.
Think that number might mean that Boeing is running out of airplanes to build?
Far from it. In fact, according to Boeing's July filing with the SEC, the company still has more than 5,200 airplanes on order at its Commercial Aircraft division. That's $377 billion worth of business "in the bag." And it's not even counting backlog at the company's other divisions. Add them all up, and total backlog at the company is valued at $440 billion, or about five years' worth of work at Boeing's current annual revenue rate.
Boeing busted the union
Perhaps the best reason to think Boeing will prosper in the years to come, though, is also the least politically correct: Boeing busted the union.
Late last year, in a Machiavellian gambit playing on worker fears that Boeing might shift "777X" airliner production away from Seattle, Boeing presented its International Association of Machinists and Aerospace Workers union with an ultimatum: Either sign on to a new 10-year contract that first freezes, then eliminates, worker defined benefit pensions (and holds wage hikes to about one half of one percent per year through 2024) -- or Boeing would take its business elsewhere.
In January, the union blinked, voting to ensure Boeing would keep their jobs in Seattle, and accepting the benefits cuts and meager wage increases as necessary evils.
For Boeing shareholders, though, this vote was an unalloyed good. For the next 10 years, Boeing has a firm grip on the rate at which its costs will rise, and can operate free from fears that its union might call a strike (such as the one that derailed Dreamliner production in 2008). As Boeing Commercial Airplanes President and CEO Ray Conner said at the time: "Thanks to this vote by our employees, the future of Boeing in the Puget Sound region has never looked brighter."
Boeing shareholders probably couldn't agree more.
And one more thing...
Did we mention that Boeing also pays is shareholders a tidy 2.2% dividend yield. That's key because, as smart investors know, dividend stocks simply crush their non-dividend paying counterparts over the long term. Smart investors also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.