IB Net Payout Yields Model

Net Payout Yield Focus: Boeing

Boeing (BA) reported solid Q3 results and upped guidance. Unfortunately though Boeing has done nothing to improve its Net Payout Yield. The dividend yield has now slumped to 2.4% which isn't shabby but by no means impressive considering they lack a buyback component. For now, BA is a core holding of the Net Payout Yield Portfolio (coming to Covestor soon). Without a higher yield though, we'll likely trim the position on any advances in the stock price. Management did pay down $500M in debt during the quarter which is positive, but without any moves on the stock it suggests they are complacent with the current price.

At a current price of $72, BA trades at roughly 17x the high end of the 2010 guidance of around $3.80 to $4 making the stock on the expensive side. Analysts place the 5 year growth rate around 10% so BA clearly trades expensive compared to growth potential as well. While the airplane industry is on the verge of a multi year cycle, BA management hasn't made an aggressive move to push more capital to shareholders especially in the form of a targeted buyback with the stock trading in the low $60s for a good portion of Q3. All adding up to a company with great prospect, but a stock that might be over valued now.

Most notably BA had $10B in cash/marketable securities and chose to not utilize that money to enhance shareholder value. 

Boeing PR:
  • Third-quarter earnings per share of $1.12 reported on operating margin of 8.2 percent and revenue of $17.0 billion
  • Operating cash flow of $1.9 billion reflects strong operating performance
  • Cash and marketable securities of $10.0 billion provides strong liquidity
  • Backlog grew to $321 billion including $25 billion of new orders in the quarter
  • 2010 earnings per share guidance increased to between $3.80 and $4.00 per share on stronger Commercial Airplanes outlook
"Our results and revised outlook reflect the continued strong performance of our commercial production and services programs and the ability of our defense businesses to produce solid results in a challenging environment," said Jim McNerney, Boeing chairman, president and chief executive officer.  "Orders were particularly encouraging, with a multi-year production contract for 124 F/A-18 aircraft and more than 200 net commercial airplane orders booked in the quarter, increasing our backlog and demonstrating improved overall market confidence."


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