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Boeing Raises Dividends; Buybacks Shares
Hot Picks, Tradeable | 19 December 2013
By: Elaine Lee
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By: Simeon Ang
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Boeing recently raised the company’s dividend by 51 percent and authorised a US$10 billion share-repurchase plan. This will be the largest share buy back in its history, representing about 10 percent of the company’s outstanding stock.

The quarterly dividend will rise from US$0.485 to US$0.73 which is a 50.5 percent increase. The dividend payout comes to US$2.92 on an annualized basis with an indicative yield of about 2.2 percent (based on 18 December’s closing price of US$135.49).

Flying Above The Clouds
Boeing (along with EADS- European Aeronautic Defence and Space) are the only two global giants in position to take advantage of the rising demand for aircraft. The Dreamliner producer has benefited massively from the strong demand for its commercial planes.

The surge in revenue and cash can be largely attributed to the huge order of US$65 billion from Emirates earlier in the year at the Dubai Air Show, where it got almost US$100 billion in total orders. Local carrier, Singapore Airlines is also set to spend US$17 billion for a large order of 60 mid-size jets.

Setting a record of 635 to 645 aircraft deliveries this year, about 60.9 percent of total revenue is derived solely from Boeing’s commercial planes sector. The sector booked 200 net orders during 3Q13 with a backlog remaining strong. Boeing currently boasts nearly 4,800 airplanes valued for a record US$345 billion in its order books.

“Consistently strong operating performance is driving higher earnings, revenue and cash flow as we deliver on our record backlog and return increased value to shareholders,” said Boeing Chairman, President and CEO Jim McNerney.

Gains from commercial planes has helped to offset the decline in U.S military spending, which resulted in a slight drop of 3.68 percent in revenue (9M13) from Boeing military aircraft. Overall, Boeing’s Defense, Space and Security sector managed a 0.3 percent increase to US$24.3 billion. This was due to higher volumes in maintenance, modifications and upgrade for global services and support.

Revenue of the Defense segment contributed about 38.7 percent of total revenue (9M13).

Strong Margins Burnishes Boeing’s Future
Record numbers of airplanes delivered at high profit margins have driven Boeing’s stock price to ceiling highs. This can be seen by the 79 percent surge in shares, which is the most among 30 stocks in the Dow Jones Industrial Average.

“Our balanced cash deployment strategy provides increased dividends and share repurchase authorization to deliver consistent returns to our shareholders while maintaining investment in productivity and innovation for future growth,” said Boeing Executive Vice President and Chief Financial Officer Greg Smith.

With rejuvenated confidence, Boeing is looking to sustain its strong operational performance with increasing cash flows. They are in the midst of expanding their product offering as the company begins production on its several new jets, namely the wide-body 777x jet.

Source: The Wall Street Journal; Key Features of the Boeing 777x

Global demands for commercial planes are rising on passenger levels and is expected to continue thriving over the coming years. In its recent earnings outlook, the International Air Transport Association (IATA), forecast a rise of five to six percent in passenger level growth to a record 3.3 billion passengers in 2014 and the next few years.

The inherent rise in air traffic will bode well to commercial aircraft manufacturers like Boeing.

What Should You Look Out For Now?
Based on the day chart, Boeing’s share price has been on an uptrend since 1Q13, no doubt spurred by its strongest-ever delivery for the month of March with a total of 55 units rolled out.

Source: FactSet Research Systems

Presently, it is trading near its record high of US$142 per share attained on 18 November 2013. Since the start of the year, its 50-day moving average (MA) has been surging higher and away from its 200-day MA. While this does not necessarily mean it will pull back, to increase the positive outlook on the stock, we would pay attention to the next narrowing of the two MAs as a crossover may reverse the uptrend.

Based on momentum indicators, the relative strength index is closer to the oversold region, but has been shifting away from it since the second week of December. Currently, the Williams %R is nearer to the overbought zone, but neither are cause for caution at this present juncture.

Looking at the two trend lines (blue in color), we notice that Boeing has been trading within an upward channel since March, before forming a bull flag in the past few weeks.

Since late October, Boeing’s shares has been trading in the range between US$130 and US$140, we would like to see the share price find a support along the lower trend line before surging up once more. If it surpasses its previous high and maintain above the top of the flag (US$140), we would expect to see further upside to Boeing.

With additional reporting by Shane Goh

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This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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