Boeing (BA) paid $608 million in dividends during 4Q15. In 2015, BA paid a total of $2.5 billion in dividends, which is ~36% of its free cash flow generated for 2015.
Yield rises as stock declines
With the recent 10% decline in BA stock, the dividend yield has also risen. Its current dividend yield stands at 3.71%. This is higher than the industrial average dividend yield of 2.7%.
This is currently the highest among its peers. Airbus has a yield of 2.13% and Embraer’s (ERJ) yield is 0.09%. Lockheed Martin (LMT) has a dividend yield of 3.16%, United Technologies’ (UTX) yield is 2.95%, and General Dynamics (GD) has a dividend yield of 2.21%.
Cash dividend coverage ratio
Boeing’s (BA) cash dividend ratio stands at 1.67x at the end of 4Q15, indicating its ability to just about sustain dividend payouts. The ratio is calculated as cash flows over dividends paid, which measures the ability of the company to pay dividends. A ratio of less than 1 indicates dividend payouts higher than the company’s cash flows, which may be difficult to sustain in future.
Since 2010, air travel has seen great demand and so has the demand for Boeing’s (BA) commercial aircraft. Since then, Boeing has paid out consistent dividends.
Air travel demand is set for another year of growth, supported by growing global economic growth. With rising demand and low raw material costs, BA is also set for another year of growth. The company has already announced a 20% increase in its quarterly dividend for 2016.