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What are we looking for?

Sustainable dividends from aerospace suppliers ready to soar on rising commercial travel.

The screen

The Boeing Co.’s final delivery of the now-retired 747 jet this week got us thinking about the bright future ahead for air travel – even without that wide-body plane, introduced in 1968.

Rather than focus on aircraft makers such as Boeing, though, we’re looking at their suppliers. They can expect to piggyback on rising demand for planes as air travel volumes continue their pandemic rebound.

Like most manufacturers, aircraft suppliers – at least in the near term – face challenges, from supply-chain disruptions and logistical issues to elevated labour costs and other expenses. However, as niche, specialized players, they’re able to pass along those higher costs to customers.

Our search started with a list of suppliers of airline parts and systems before homing in on those with sound growth prospects and currently paying dividends. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • one point for five years of continuous dividend payments – two points for more than five;
  • two points if it has raised the payment in the past five years;
  • one point for management’s commitment to dividends;
  • one point for operating in non-cyclical industries;
  • one point for limited exposure to foreign currency rates and freedom from political interference;
  • two points for a strong balance sheet, including manageable debt and adequate cash;
  • two points for a long-term record of positive earnings and cash flow to cover dividends;
  • one point if the company is an industry leader.

Companies with 10 to 12 points have the most secure dividends or the highest sustainability. Those with seven to nine points have above-average sustainability; four to six points, average sustainability; and one to three points, below-average sustainability.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc., the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Reliable dividends among aerospace suppliers

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Garmin Ltd.GRMN-NAbove Average82.918,952.0-19.3101.11
2Moog Inc.MOG.A-NAbove Average81.13,025.121.795.33
3Howmet Aerospace Inc.HWM-NAbove Average80.416,834.328.440.59
4FTAI Aviation Ltd.FTAI-QAbove Average75.22,222.0-15.422.86
5Kaman Corp.KAMN-NAverage63.2706.6-37.125.33
6Park Aerospace Corp.PKE-NAverage62.8284.86.014.26
7Magellan Aerospace Corp.MAL-TAverage61.1529.1-8.79.25

Source: Dividend Advisor.

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

**Share price and market cap are in native currency

Our TSI Dividend Sustainability Rating System generated seven stocks. Global supplier Park Aerospace Corp., headquartered in Melville, N.Y., makes the advanced composite materials integral to aircraft structures. Based in Elma, N.Y., Moog Inc. makes precision control components and systems for military and commercial aircraft and more. Garmin Ltd., based in Olathe, Kan., provides navigation, communications and other devices, enabled by GPS technology. This includes aircraft avionics (electronic systems). Bloomfield, Conn.’s Kaman Corp. makes aircraft bearings, components, structures and more for commercial, military and general aviation crafts. Magellan Aerospace Corp., headquartered in Mississauga, Ont., supplies structural, engine and other components, as well as providing repair and overhaul services, for a number of major commercial and military aircraft programs. FTAI Aviation Ltd., headquartered in New York City, owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. And finally, Howmet Aerospace Inc., based in Pittsburgh, focuses on jet engine components, aerospace fastening systems and airframe structural components, as well as forged aluminum wheels for commercial transportation. (Note: Howmet’s meagre yield reflects its impressive price rise over the past few years.)

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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