- 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.
- 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.
Recently, I got an article published about Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN). That’s right. It’s a higher-growth utility that might help to fill your income needs.
- Algonquin is estimated to grow at a rate (of 10%) that’s double that of some its bigger peers.
- It offers a ~4.9% yield and aims to increase its dividend at a CAGR of 10% through 2022.
Algonquin’s portfolio is best summed up in two parts:
1) Non-regulated electric generation assets powered by renewable and thermal energy. It has 1,545 MW of net generating capacity (68% wind, 8% hydro, 2% solar, and 22% thermal) across 38 facilities. This part of the portfolio makes up ~30% of Algonquin’s assets.
About 87% of the output from its hydro, wind, and solar facilities (i.e. ~68% of its net generating capacity) have long-term power purchase agreements with a production-weighted average remaining term of ~15 years.
2) Regulated electric, natural gas, water distribution and wastewater collection utility systems, and transmission operations serve 762,000 customers across 12 U.S. states through 33 utilities. This part of the portfolio makes up ~70% of Algonquin’s assets.
Algonquin has been benefiting from the shift to renewable power from coal. The utility has been growing its power portfolio partly by developing its own projects and partly by accretive acquisitions. Its regulated utilities continue to grow organically, and the company is also on the lookout for accretive acquisitions.
Algonquin has increased its dividend for 7 consecutive years with a 5-year dividend growth rate of ~9.6%, and it currently offers a decent yield of ~4.9% that’s juicier than most other utilities. Management targets dividend growth of ~10% per year, which will reduce Algonquin’s payout ratio over time.