Could Investors Profit From Boeing?


American aerospace giant Boeing needs little introduction: Few of us haven't flown on its iconic 747 and 737 aircraft. But its product range is much, much broader than commercial aircraft.

Boeing, in short, is the world's leading aerospace company, and the largest manufacturer of commercial airliners and military aircraft combined, with a product line-up that includes rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles, and advanced information and communication systems.

What's more, as a major service provider to NASA, Boeing is also the prime contractor for the International Space Station.

Yet -- of especial interest to investors today -- Boeing's shares are under a cloud right now, thanks to Friday's announcement that America's Federal Aviation Administration has ordered a review into the safety of its flagship 787 Dreamliner aircraft, following a spate of on-board fires and other problems.

As I write these words, for instance, the stock is down 2.5%. Any more bad news -- evidence of actual 787 problems, prompting groundings; or further cuts in American government defense or space spending -- and Boeing shares could get seriously cheap.

Buy America
But Boeing, it's fair to say, isn't a share that many British investors will ever have considered buying -- despite the fact that buying the shares of international companies is now easier, and cheaper, than ever.

Indeed, America's stock markets could well be considered a must buy for serious long-term investors, making up as they do a whopping 52% of the MSCI World Index. The U.K., by comparison, makes up just 9%.

Yet for all of this, few of us seeking exposure to America's markets get further than buying an American index tracker -- such as HSBC's low-cost HSBC S&P 500 ETF, or Vanguard's Vanguard S&P 500 ETF.

Doing the deal
The facts: look closely, and for most investors, trading through most big name brokers, buying American shares is no more complicated than buying British shares.

Granted, the commission is a little higher, and there are foreign exchange costs to take into account, but these aren't excessive. My broker, for instance, charges just £11.95 commission -- and don't forget that with foreign shares, there's no stamp duty to pay.

That said, there's a little more form filling involved. America's Internal Revenue Service charges a 30% withholding tax on dividends, for instance, and overseas investors -- that's you -- need to fill in a W-8BEN form once a year to get a reduced tax rate.

The good news? Every broker is familiar with these forms, and filling it in is very straightforward. Putting it another way, compared to when I first bought American shares through an American broker in the 1990s, today's dealing arrangements couldn't be simpler.

So is Boeing a buy?
The market, it's fair to say, isn't panicking over the Federal Aviation Administration's 787 review. And that's not surprising: commercial aircraft make up only half of Boeing's sales, and the 787 is just one aircraft in an extensive line-up.

That said, revenues and earnings can be lumpy, especially in an era of government cutbacks. But the dividend continues smoothly upwards.

Year Ending Dec. 31 2011

Year Ending Dec. 31 2010

Year Ending Dec. 31 2009

Year Ending Dec. 31 2008

Year Ending Dec. 31 2007

Revenues (billion)






Pre-tax Profit (billion)






Earnings per Share






Dividend per Share






Source: Digital Look; Boeing

In any case, the real attraction of Boeing to investors is the opportunity that it offers to acquire a stake in a company that has no real equivalent in the UK. BAE Systems, for instance, left the commercial aircraft business some years back, leaving just Boeing, Airbus, and Brazil's Embraer as the Western world's main suppliers.

Changing hands at $75.16 today, Boeing's shares are rated on a historic price-to-earnings ratio of 13, and offer a historic yield of 2.6%. In short, already reasonably rated today, Boeing could well become an attractive buy if events in the weeks ahead throw up short-term weakness in its share price.

Follow the money
One investor who certainly buys on weakness is Warren Buffett, whose Berkshire Hathaway investment vehicle has delivered returns of over 20% per annum since 1965, and turned Buffett himself into the world's third-wealthiest person.

As it happens, Buffett recently took advantage of weak results and a dip in the share price to top up his holding in one particular FTSE 100 share -- an unusual move for an investor who rarely ventures outside the United States. As a result, he now owns over 5% of this company, which he first began buying back in 2006.

Its name? Simply download this free special report from The Motley Fool -- "The One U.K. Share Warren Buffett Loves" -- to find out. Inside, you'll discover just why Buffett has invested over £1 billion in this business, and why you could consider taking a stake, too.

With the share price sharply up in Buffett's most-recent purchase price, the share is still rated below the P/E of the FTSE 100 (UKX) as a whole, and also offers a market-beating prospective yield of 4.2%. As I say, the report is free, and can be in your inbox in seconds. Click here to download it.


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Malcolm Wheatleyowns shares in BAE Systems, but in no other company mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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