Is This American Icon’s Dividend Safe?

Marc Lichtenfeld By Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Safety Net

There are few companies that feel as American – or fill Americans with as much pride – as Boeing (NYSE: BA).

Ever since Orville and Wilbur took off from Kitty Hawk, North Carolina, in 1903, the United States has been a leader in aeronautics.

What American isn’t happy when Boeing lands a big contract over a foreign competitor like Airbus?

Boeing makes planes – such as the 737, 747 and 777 – for airlines, but it also makes a wide variety of planes and helicopters for the military. “Household” names like the B-52, the Apache helicopter and Air Force One are all Boeing products.

Additionally, it makes missiles and missile defense systems, as well as a wide range of other things used to defend our country and outside nations.

But Boeing doesn’t make the hearts of only red-blooded Americans swell with pride.

Shareholders of any nationality are thrilled with Boeing these days. The stock has doubled since February of last year.

(That shouldn’t come as a total shock… Earlier this week, I told you how aerospace and defense companies have been dominating the broader market.)

Along with Boeing’s strong growth, investors receive a solid $1.42 per share quarterly dividend, which comes out to just less than a 3% yield.

Can Boeing continue to keep its investors who are seeking income happy?

A Perfect Score

When analyzing Boeing for dividend safety, it gets a perfect score in all of the categories.

The company raised its dividend 14 times in the past 25 years (with no cuts), including every year for the past six years.

And over the past several years, the company’s free cash flow has steadily climbed higher.

You can see here that Boeing’s free cash flow has risen from $6.08 billion to an expected $8.51 billion this year, an impressive 40% gain in just four years.

As a result of Boeing’s strong cash flow generation, its payout ratio is very low.

In 2016, Boeing paid out just 35% of its free cash flow in the form of dividends. This year, that figure is expected to climb to 41%.

I like to see the payout ratio at 75% or less. That gives me confidence that a company can continue to pay its dividend even if it suffers through a rough year or two.

With a payout ratio of 40%, Boeing could continue to raise the dividend even if cash flow fell.

With rising cash flow, a low payout ratio and a strong dividend-paying history, according to SafetyNet Pro, Boeing’s dividend is as rock solid as it gets.

What Is SafetyNet Pro?

SafetyNet Pro is a groundbreaking tool that predicts dividend cuts and raises with stunning accuracy. With it, you can determine the dividend safety rating of nearly 1,000 stocks. Access to SafetyNet Pro is reserved exclusively for subscribers of Marc’s newsletter, The Oxford Income Letter. To learn more about SafetyNet Pro and The Oxford Income Letter, click here now.

 

That’s good for Boeing, its investors and America.

Dividend Safety Rating: A

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments section.

Good investing,

Marc

P.S. I recently started using a system similar to SafetyNet Pro to identify and exploit big winners just like Boeing. This time though, I’m using military-grade technology. To learn more about the system that’s landing gains as high as 1,090%, click here now.