Category Archives: Dividend Investing

Boeing: Should You Buy The Best-Performing Defense Stock Now?

Summary

  • Boeing outperforms its peers and the market in multiple periods.
  • Boeing has a strong backlog of seven years-plus based on current production capacity.
  • Applications of new technologies throughout Boeing’s business will allow for margin expansion to the mid-teens by 2020 and further expansion beyond that.
  • The stock has been in consolidation mode year to date. So, it’s a good time to dig further into the company to see if it fits your portfolio.

Aerospace and defense stocks have finally taken a breather and are in consolidation. As I was reviewing a potential dividend-growth stock to buy from the group, I noticed that Boeing (NYSE:BA) has outperformed its peers, including Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD), and Raytheon (NYSE:RTN) and the market in different periods, including the year-to-date, one-year, three-year, five-year, and 10-year periods.

A Business Overview

Boeing is the world’s biggest aerospace company. It’s also the leading manufacturer of commercial airplanes and defense, space and security systems and a key provider of government and commercial aerospace services.

Boeing supports airlines and the U.S. and allied government customers in 150-plus countries. Last year, its global services segment made up about 15.6% of revenue. Year to date, this segment grew 11%, which will help stabilize its overall business performance as this business is non cyclical, unlike the commercial aerospace industry.

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AltaGas Ltd. (TSX:ALA) Now Offers A 9.6% Yield. Is It Safe?

Summary

  • AltaGas is revisiting its 52-week (and seven-year) low.
  • The company now offers a 9.6% dividend yield.
  • Is the dividend safe?

AltaGas (TSX:ALA) used a mix of debt and essentially stock for the ~CAD$9 billion WGL Holdings acquisition. The debt included a ~US$4.95 billion bridge facility. It also raised capital from the markets by selling CAD$2.6 billion of subscription receipts in Q1 2017.

The acquisition took about a year and four months to finally close in July 2018. In the process, the company had to pay interest on the debt and high dividend-equivalent payments for the receipts, which were converted to common shares when the acquisition closed.

For example, in 2017, AltaGas incurred CAD$170 million of interest expense, which was 12.6% higher than the interest expense of CAD$151 million in 2016 largely due to the financing costs of roughly CAD$19 million associated with the bridge facility.

In 2017, AltaGas paid about CAD$147.84 million of dividend-equivalent payments for the subscription receipts. In comparison, it declared ~CAD$362 million of common stock dividends and ~CAD$59 million of preferred dividends.

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How to Build a Position in Your Favorite Stocks

This article with an additional example using Tencent (OTCMKTS:TCEHY) first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Have you ever missed out on high-flying winners? Have you ever been stuck in a (seemingly) losing stock for a long time? I’ll use Amazon.com (NASDAQ:AMZN) and CVS Health (NYSE:CVS) as examples for illustration.

person with a question

How to Build a Position in Your Favorite High-Flying Winner

An investment in Amazon 10 years ago has become a 24-bagger. In other words, it delivered returns of roughly 37.5% per year. That said, we’ve been in a bull market since 2009.

In a correction, it’s possible that Amazon stock could fall 30-50%. In a normal market though, one of the best ways to build a position in a high-flying stock like Amazon is buying it periodically.

Some investors wait to buy stocks on dips. However, you’ll notice that in the last few years, dips in Amazon stock didn’t occur very often.

chart showing dips of Amazon stock between 2016 and 2018

Source: Google Finance with author annotation – Potential buy points when using the “buying on dips” strategy

If you waited for a dip in Amazon stock in June 2017, you wouldn’t have gotten one until April 2018. However, by then, the stock had already appreciated +40%.

At this point in the cycle, I’m leaning more towards buying high-flying stocks on a correction, whenever it may occur. Share in the comments below if you have a different opinion.

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