Please ensure Javascript is enabled for purposes of website accessibility

Will The Boeing Company Raise Its Dividend in 2016?

By Travis Hoium - Jan 27, 2016 at 8:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Strong commercial sales could bring another dividend increase this year.

Coming out of the Great Recession, Boeing (BA -2.84%) had gone through a decade of ho-hum results. Revenue grew just 28% between 2000 and 2010, and earnings per share declined 29%. But since the recession, air travel is soaring, earnings are up, and growing dividends have become a great reason to own Boeing stock. Will investors get another dividend increase this year?

BA EPS Diluted (TTM) Chart

BA EPS Diluted (TTM) data by YCharts

Earnings momentum is strong
There are a lot of tailwinds helping Boeing right now. Commercial aircraft demand is strong, raw-materials costs are low, and financing costs are extremely low. Those factors have combined to drive revenue consistently higher over the past five years.

BA Revenue (TTM) Chart

BA Revenue (TTM) data by YCharts

Commercial backlog was $426 billion at the end of the third quarter, just as production of the 787 ramps up and 737 MAX begins. The core commercial business that most consumers think of then they think of Boeing is strong. Questions for the company pertain more to the defense business. 

Will military spending overshadow commercial aircraft?
Budget cuts for the U.S. military has been the one negative for Boeing of late, but it does look like any decline will be offset by gains in businesses like space and security. The company was awarded a five-year extension of its contract with the International  Space Station and has been investing heavily in its drone capabilities for commercial applications.

In the third quarter, Defense, Space, and Security segment revenue was up 6% to $8.4 billion, and orders totaled $9 billion in the quarter. If there's a decline in military revenue it shouldn't be a huge negative for Boeing with all of the other growth opportunities it has.

The dividend has room to grow
With operations in a strong place, the next question is whether Boeing has the room to grow its dividend in 2016?

Debt stood at just $9.0 billion at the end of the third quarter, a very manageable level for a company that's already earned $6.3 billion from operations in the first three quarters of the year. Dividends paid over the past year are only 44% of earnings per share:

BA Dividends Paid (TTM) Chart

BA Dividends Paid (TTM) data by YCharts

All things considered, I think Boeing has more than enough room to raise its dividend in 2016 and could even take out debt to buy back shares. For investors looking for a great dividend stock right now, Boeing is a great option. It has a lot of tailwinds in its business and generates a lot of cash, just what dividend investors want to see.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$167.20 (-2.84%) $-4.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
395%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.