Boeing announces $10 billion buyback, raises dividend

SEATTLE Tue Dec 17, 2013 9:10am IST

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young/Files

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013.

Credit: Reuters/Jim Young/Files

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SEATTLE (Reuters) - Boeing Co's (BA.N) board raised the company dividend about 50 percent on Monday and approved $10 billion in new share buyback authority that the company said it would use in the next two to three years.

The share repurchase represents about 10 percent of Boeing's outstanding stock, ranking it in the middle of buybacks by large U.S. companies, which are on a stock-buying spree this year.

Boeing shares rose about 2 percent in extended trading after the news. They closed at $134.72 on the New York Stock Exchange on Monday.

The increases in dividends and share repurchases "reflect sustained, strong operational performance by our businesses, increasing cash flow, and our confidence in the future," Boeing Chief Executive Jim McNerney said in a statement.

The new repurchase amount adds to about $800 million remaining from the company's 2007 stock repurchase authorization, and buying will begin in 2014, Boeing said. The quarterly dividend is 73 cents per share, up from 48.5 cents.

Boeing is enjoying a surge in revenue and cash as it ramps up commercial jet production, with a target of delivering a record 635 to 645 aircraft this year. Those gains help offset declining U.S. military spending, which is hampering Boeing's defense businesses.

The company is also preparing to invest billions of dollars in two new models, the narrow-body 737 MAX and the wide-body 777X.

The increased payouts come as the company tries to clinch a labor contract with its unionized machinists that would ensure the 777X is built in the Seattle area. The 31,000 local union members have rejected Boeing's offer, largely because it would switch their defined-benefit pension to a 401(k)-style plan.

"Boeing is looking forward to a period of long-term financial stability made possible primarily by the men and women of District 751," said Tom Wroblewski, president of the International Association of Machinists, District 751, which represents the Seattle-area workers.

"While other production sites have failed to hit their targets, we have delivered record numbers of airplanes at record profit margins this year, helping drive the stock price to record highs," he added. "Given this, I feel it's wrong for the company to try to take away pension benefits that provide our members with their own future financial stability."

For investors, the rise in returns "speaks to the belief that the company has line of sight to improving its operating performance," said Howard Rubel, an analyst at Jefferies & Co. Inc. The buyback amount matched his forecast, and the dividend was larger, he said.

Robert Stallard, an analyst at RBC Capital Markets, said the $10 billion repurchase over two or three years was below the $6.5 billion in repurchases he expected in 2014.

"So although this news will probably be welcome, the impact on consensus EPS estimates may not be as positive as expected," Stallard added in a note to clients.

U.S. companies in the Standard and Poor's 500 authorized nearly $123 billion in buybacks in the second quarter, the most since the third quarter of 2011, according to FactSet Research Systems Inc (FDS.N).

Among Dow Industrial Average companies, Boeing's $10 billion repurchase was in line with General Electric Co (GE.N), Pfizer Inc (PFE.N), Intel Corp (INTC.O) and Goldman Sachs Group Inc (GS.N). But was far smaller than $40 billion for Microsoft Corp (MSFT.O) and $17 billion for Home Depot Inc (HD.N).

But among peer companies authorizing buybacks of $10 billion or more, Home Depot is giving shareholders a much larger boost. It is buying back 15 percent of its outstanding shares. In comparison, GE's $10 billion buyback will purchase just 4 percent of outstanding shares.

(Reporting by Alwyn Scott in Seattle and Aman Shah in Bangalore; Editing by Maju Samuel, Andre Grenon and Stephen Coates)

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