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Will Boeing Increase Its Dividend Payout in 1Q17?

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Dividends

Boeing has been a consistent dividend payer for more than two decades and a good one at that. For the full year 2016, BA paid a total of $2.8 billion in dividends, which is ~35.4% of the free cash flow generated in the same period.

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High yield

Boeing’s current indicated dividend yield is 3.2%, which is higher than the industrial average dividend yield of 2.3%. BA has a trailing-12-month yield of 2.5%.

Peer Lockheed Martin’s (LMT) indicated dividend yield is at 2.8%, United Technologies’ (UTX) is at 2.4%, and General Dynamics’ (GD) is at 1.8%.

Cash dividend coverage ratio

The cash-dividend-coverage ratio is calculated as income before extraordinary items minus minority and preferred dividends over dividends paid. It measures the company’s ability to pay dividends.

At the end of 4Q16, BA’s cash dividend ratio stood at 3.3x. This means that Boeing can just about sustain dividend payouts at the current rate. Boeing’s average cash dividend ratio has been at about 3x in the last 16 quarters, which gives us a better idea of Boeing’s ability to sustain such high dividends.

Outlook

Boeing has a history of increasing dividend payout once every four quarters. The company increased its dividend by 20% to $1.09 in the first quarter of 2016. Boeing has announced a 30.3% increase in dividends for 1Q17 to $1.42. Investors can likely expect dividends to stay at this rate for the rest of 2017.

Investors can gain exposure to Boeing stock by investing in the ProShares Ultra Dow60 (DDM), which holds 4.5% in Boeing.

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