It's not a matter of if, but when, the stock market has its next crash. That's how the game works, folks. But rather than cashing out and attempting to foolishly time the market's bottom, there are companies well suited to weather a downturn. Some companies are worth owning during a downturn because of a strong dividend payment; some are worth owning because they possess little to no debt. Some companies are excellent choices for a volatile market because of their diverse portfolio of products, and some because of a healthy backlog of orders.
Backlog flies high
One of the greatest aspects of Boeing as an investment is its enormous backlog of orders; it's an amount of revenue transparency that helps investors sleep at night in the event of an economic downturn.
As you can see in the graph above, Boeing's backlog sits at an extremely high level of $495.1 billion -- and $435 billion of that total is from Boeing's healthy commercial airplane business. If you're wondering, that's roughly five times the amount of revenue Boeing anticipates it will generate this year.
When a company boasts five years of revenue locked in, that serves as a great buffer in the event of an economic downturn.
Another thing to note is that Boeing's backlog and revenue generation only matters if that converts to cash. That's one factor that also continues to improve, as Boeing's operating cash flow has improved over the last half decade, going from $2.9 billion in 2010 to $4.0 billion, $7.5 billion, $8.1 billion, and $8.8 billion in the following years sequentially.
Furthermore, Boeing has proven its ability to return value to shareholders with its improving cash flow, as you can see in the graph below.
Early in 2015 Boeing's dividend was increased 25% to $0.91 per share, and it has increased by over 192% total over the past decade.
It's clear that Boeing would serve investors well during an economic downturn with its improving cash flow, healthy backlog of orders, and consistently increasing dividend payout. Now let's switch gears and look at another industrial company that offers some of those qualities, and another as well.
Addition by subtraction is a fair way to summarize General Electric's improved outlook in the event of an economic downturn. What brought GE to the brink of collapse in the recent Great Recession was GE Capital. Much like other banks that found themselves in hot water during the recession, GE Capital brought billions of losses to the company that had once been known as a pure industrial juggernaut.
Now, with GE continuing to divest itself from the capital business segment, the company has reemerged as an industrial powerhouse and will continue to focus on its roots. In fact, GE's first-quarter was much better than many investors who merely glanced at the numbers realized. For instance, GE's industrial operating earnings-per-share increased 14%, and industrial segment profit was up 9%, while the overall decline was mostly due to charges associated with GE Capital. To see the significance, look below.
With the risky financial arm continuing to shrink in its importance and potential impact over the next two years, GE is now an industrial juggernaut with a diverse product and business segment range that will serve investors well during tough economic times.
Also, in similar fashion to the Boeing, GE also boasts a strong backlog of orders in case we face a slowing economy in the years ahead.
Ultimately, both Boeing and GE have many qualities that you want in companies well prepared to weather economic uncertainty. Whether it's strong dividends, cash flow, an enormous backlog of orders, or less risky business segments, investors in either of these two companies can sleep at night, regardless of what the market does in the coming years.