We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Boeing Hike Dividend by 30% as per Morgan Stanley?
Read MoreHide Full Article
Shares of The Boeing Company (BA - Free Report) inched up 1.3% on Dec 8 to $155.39 at the close of the trading session, after analysts at financial services firm Morgan Stanley (MS - Free Report) revealed expectations of an impressive 30% dividend hike by the aerospace giant. Note that Morgan Stanley’s projection reflects a notable improvement over the 20% hike in dividend declared by Boeing around the same time last year.
In retrospect though, such massive dividend hikes are not exactly new for Boeing. At the end of 2013, the company had rewarded investors with an increase of almost 50% in its quarterly dividend.
Also, Morgan Stanley’s projection is far above the estimates given by analysts from other firms.
Other Firms’ Forecasts
In late November, an analyst at Wells Fargo revealed expectations of Boeing keeping its year-end dividend hike tradition alive with at least 10–15% hike in its quarterly payout. Based on its share price of $150 at that time, the company’s dividend yield was 2.9%, which would reach 3.2–3.3% after the predicted dividend hike.
Moreover, the analyst had envisioned Boeing’s stock price to be in the range of $150–$160 per share around mid-December, after it announces the dividend hike.
Why Does Morgan Stanley Expect More?
Morgan Stanley analysts have put forth several arguments in support of their high expectations. Firstly, they pointed out a change in management’s tone regarding the company’s capital deployment policy, when it focused on adding ‘significant value’ to its dividend and executing stringent policy review. Secondly, they were impressed by the company’s strong cash flow story as well as the confidence with which management addressed investor concerns about growth, sustainability and accounting strategy.
Thirdly, the analysts believe that Boeing’s shares are trading at a considerable discount on a free cash flow (FCF) basis, which could drive the stock as high as $200 per share. Lastly, they believe that Boeing can comfortably hike its dividend payout ratio, without compromising its share buyback commitments or business outlook. Their confidence is mainly based on the company’s solid backlog, A-rated balance sheet and adequate FCF, which support a balanced capital deployment policy.
How Much will Boeing’s Investors Gain?
Considering Boeing’s current dividend of $1.09 per share and yesterday’s closing share price of $155.39, the company’s current dividend yield is 2.8% on an annualized basis. If the dividend is indeed raised by 10–15%, as per most analyst estimates, the new payout would be in the range of $1.20–$1.25, reflecting a dividend yield of 3.1% to 3.2%.
However, if the company declares a 30% dividend hike, as per Morgan Stanley’s projection, the new payout would amount to $1.42, reflecting a dividend yield of 3.7%. This implies that each shareholder of Boeing would gain an extra 13.6–18.3% on each common share of the company.
Our View
As the world’s largest aircraft manufacturer, Boeing holds a respectable position in the U.S. as well as the global aerospace and defense market. Not only did the company beat third-quarter earnings and revenue expectations comfortably, but it also raised the guidance for 2016, underscoring its strong cash flow position.
Backed by these factors and a comparative analysis of the company previous annual reports, it is safe to expect an increase in Boeing’s dividend payout this time too. However, it seems like predicting the rate of increase is still a topic of debate.
Even so, the company has consistently been plagued by budget volatility, uncertainties related to high-cost programs, risks associated with key project executions and order cancellations. That could be the reason why, Boeing’s shares gained 6.6% on a year-to-date basis, underperforming the Zacks categorized Aerospace-Defense industry’s 14.05% gain. The company has also put up a weak show in comparison to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) and Lockheed Martin Corp (LMT - Free Report) , both of which outperformed the industry.
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Will Boeing Hike Dividend by 30% as per Morgan Stanley?
Shares of The Boeing Company (BA - Free Report) inched up 1.3% on Dec 8 to $155.39 at the close of the trading session, after analysts at financial services firm Morgan Stanley (MS - Free Report) revealed expectations of an impressive 30% dividend hike by the aerospace giant. Note that Morgan Stanley’s projection reflects a notable improvement over the 20% hike in dividend declared by Boeing around the same time last year.
In retrospect though, such massive dividend hikes are not exactly new for Boeing. At the end of 2013, the company had rewarded investors with an increase of almost 50% in its quarterly dividend.
Also, Morgan Stanley’s projection is far above the estimates given by analysts from other firms.
Other Firms’ Forecasts
In late November, an analyst at Wells Fargo revealed expectations of Boeing keeping its year-end dividend hike tradition alive with at least 10–15% hike in its quarterly payout. Based on its share price of $150 at that time, the company’s dividend yield was 2.9%, which would reach 3.2–3.3% after the predicted dividend hike.
Moreover, the analyst had envisioned Boeing’s stock price to be in the range of $150–$160 per share around mid-December, after it announces the dividend hike.
Why Does Morgan Stanley Expect More?
Morgan Stanley analysts have put forth several arguments in support of their high expectations. Firstly, they pointed out a change in management’s tone regarding the company’s capital deployment policy, when it focused on adding ‘significant value’ to its dividend and executing stringent policy review. Secondly, they were impressed by the company’s strong cash flow story as well as the confidence with which management addressed investor concerns about growth, sustainability and accounting strategy.
Thirdly, the analysts believe that Boeing’s shares are trading at a considerable discount on a free cash flow (FCF) basis, which could drive the stock as high as $200 per share. Lastly, they believe that Boeing can comfortably hike its dividend payout ratio, without compromising its share buyback commitments or business outlook. Their confidence is mainly based on the company’s solid backlog, A-rated balance sheet and adequate FCF, which support a balanced capital deployment policy.
How Much will Boeing’s Investors Gain?
Considering Boeing’s current dividend of $1.09 per share and yesterday’s closing share price of $155.39, the company’s current dividend yield is 2.8% on an annualized basis. If the dividend is indeed raised by 10–15%, as per most analyst estimates, the new payout would be in the range of $1.20–$1.25, reflecting a dividend yield of 3.1% to 3.2%.
However, if the company declares a 30% dividend hike, as per Morgan Stanley’s projection, the new payout would amount to $1.42, reflecting a dividend yield of 3.7%. This implies that each shareholder of Boeing would gain an extra 13.6–18.3% on each common share of the company.
Our View
As the world’s largest aircraft manufacturer, Boeing holds a respectable position in the U.S. as well as the global aerospace and defense market. Not only did the company beat third-quarter earnings and revenue expectations comfortably, but it also raised the guidance for 2016, underscoring its strong cash flow position.
Backed by these factors and a comparative analysis of the company previous annual reports, it is safe to expect an increase in Boeing’s dividend payout this time too. However, it seems like predicting the rate of increase is still a topic of debate.
Even so, the company has consistently been plagued by budget volatility, uncertainties related to high-cost programs, risks associated with key project executions and order cancellations. That could be the reason why, Boeing’s shares gained 6.6% on a year-to-date basis, underperforming the Zacks categorized Aerospace-Defense industry’s 14.05% gain. The company has also put up a weak show in comparison to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) and Lockheed Martin Corp (LMT - Free Report) , both of which outperformed the industry.
Zacks Rank
Boeing currently holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>