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3 Reasons to Get Excited About Bombardier, Inc

Throughout the last five years, investors in Bombardier, Inc (TSX: BBD.B) have been constantly disappointed. Shares have been flat over the period, while markets around the world shrugged off the Great Recession and found new highs.

Lately, shares have been bogged down by the company’s line of CSeries business jets. Originally slated to begin delivery in the latter half of 2014, a few months ago the company announced that it was pushing back the timeline to late 2015. Then, just last month, one of the CSeries’ prototype planes experienced an engine malfunction in-flight, causing yet another delay to the project.

Ever since the CSeries program was announced, it has been plagued with cost overruns and delays. Does that mean investors should abandon the stock? Hardly. Here are three reasons why Bombardier should be an addition to your portfolio.

1. Potential CSeries lift

At this point, most investors don’t have much positive to say about the CSeries line. The project has been a quagmire from the start. There is one group of people excited about the new planes, though — customers.

To date, the company has more than 200 firm orders for CSeries jets. Depending on the size of each plane, customers are paying between $60 and $70 million each. This translates into a backlog worth nearly $4 billion, and enough work to keep workers busy until 2019 — and that’s without getting another order.

Additionally, customers have options to purchase almost 150 additional planes. Not all of these will be exercised, but there’s still potential for some nice profits from just the options.

Once the company starts to deliver jets, look for the market to start warming up to the stock again. Many investors are short-term thinkers, needing to see results before they’ll get in. That’s why the opportunity to buy is now.

2. Rail business

So much attention is given to Bombardier’s CSeries program that investors often forget the company has a terrific rail business, supplying both locomotives and passenger transport cars for customers all over the world.

In 2013, the company’s rail division had a free cash flow of $686 million on nearly $9 billion in sales. It also has a backlog nearly four years long. Additional investments in mass transportation by cities will ensure a healthy backlog for the foreseeable future.

3. Balance sheet and dividend

Even though Bombardier has more debt than I’d like to see — it currently owes $8 billion, including preferred shares — it does have more than $3 billion in cash, more than enough to see it through the the rest of the CSeries’ development cycle.

Additionally, its shares yield 2.7%. While it’s not a huge dividend, at least investors can be assured of being paid while waiting for something to move the stock. Considering the cash hoard, I’d consider the dividend very safe.

If investors are interested in getting paid nearly 6% to wait, they should take a look at Bombardier’s preferred shares. They won’t move nearly as much as the common shares, which is helpful if another piece of bad news hits the company. The preferred dividends are safe, and the shares are liquid enough that retail investors can buy fairly easily.

No matter which way you invest in the company, Bombardier has to be attractive to value investors. Eventually, the CSeries division will sort itself out, which should send the stock higher. Investors are even getting paid to wait. It won’t happen overnight, but the company should eventually turn the corner.

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Fool contributor Nelson Smith has no position in any stocks mentioned.

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