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Comparing Boeing’s Dividend Payout Ratio with Its Peers

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Boeing’s dividend payout

Boeing’s (BA) quarterly cash dividend of $1.71 per share translates to $6.84 on an annualized basis. Based on its adjusted EPS of $11.97 for the last four quarters, its DPO (dividend payout) stands at 57%. In the last ten years, its maximum DPO was 90%, and its lowest DPO was 32%. Its current dividend payout is placed between the highest and lowest ratios.

A quick look at Boeing’s financials reveals that it has enough cash. At the end of the first quarter, it has cash and cash equivalents of $9.2 billion to cover a quarterly dividend payment of ~$997 million.

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Dividend payout ratios for its peers

Based on an annualized dividend of $8 per share and an adjusted EPS of $14.36 over the last four quarters, Lockheed Martin’s (LMT) dividend payout is 55.7%. Northrop Grumman’s (NOC) annualized dividend per share of $4.40 and adjusted EPS of $13.60 over the last four quarters translate to a payout of 32.4%.

Raytheon (RTN) has an adjusted EPS of $8.17 over the last four quarters, and its annualized dividend is $3.48. That results in a dividend payout of 42.6%. General Dynamics’ (GD) yearly dividend is $3.72 per share, and its EPS over the last four quarters is $10.12. That converts to a payout ratio of 36.8%.

Boeing’s free cash flow levels

Boeing has substantially improved its free cash flows. A company’s free cash flow shows the excess of operating cash flows over capital expenditures. Looking more deeply, we see that although Boeing’s capital investment didn’t increase significantly, its operating cash flows showed a systematic upward trend. That, in turn, boosted its free cash flow.

From $483 million in the first quarter of 2016, the aircraft manufacturer’s (IYJ) free cash flow rose 237% in a span of just one year. From $1.6 billion in the first quarter of 2017, its cash flow has increased 68% to $2.7 billion in the first quarter of 2018. That is simply astounding. Boeing has raised its operating cash flow guidance marginally to $15 billion–$15.5 billion for 2018.

In the next part of this series, we’ll compare Boeing’s forward dividend yield with its peers.

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