Aerospace and defense player Boeing Co. (BA) raised its quarterly dividend 50% from $0.485 to $0.73 and announced an additional $10 billion in share repurchases – the highest ever buyback announced by the company. The dividend payout comes to $2.92 on an annualized basis with a yield of 2.2%.
The $10 billion from the fresh authorization, along with the $800 million remaining from the 2007 authorization, will be used over the next two to three years at the management’s discretion. Boeing’s stock closed at $134.72 yesterday, with a jump after-hours to $137.28.
The announcement comes just days after the Chicago-based company’s negotiations with trade unions collapsed in Seattle. Boeing could not reach an agreement with the International Association of Machinists and Aerospace Workers, which refused to comment. The company remains in sound financial shape though, with strong and sustainable operational performance, along with increasing cash flows, according to CEO Jim McNerney.
The company is exposed to the commercial (60%) and defense (40%) segments, and along with EADS, is one of only two global players in a position to take advantage of resurging demand for aircraft. It has benefited from the strong demand for its commercial planes, even though its defense business remains uncertain. The producer of the Dreamliner has had a record year in terms of orders and backlogs. It received a staggering order of $65 billion from the Emirates Airline alone earlier in the year at the Dubai Air Show, where it got almost $100 billion in total orders.
Boeing is also in the middle of expanding its product offering with a planned capex worth billions of dollars as the company begins production on its new wide-body 777X jet. Many states are vying to become the location for the production site for Boeing’s new jet.
Analysts have a mean target for Boeing’s share price at $148.80 with high estimates of as much as $175. The company has traded in a 52-week range of $72.68-$142.
The demand for commercial planes has been rising on the back of record passenger levels globally and continued expectations of growth over the coming years. International Air Transport Association (IATA), an airline industry lobby, provided guidance for 2014 in its recent outlook in which it projects a record 3.3 billion passengers in 2014, and continued passenger growth between 5-6% for the next few years at least.
Read Bidness ETc’s article about how Boeing is well-positioned to take advantage of trends in the aviation industry in 2014.