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Boeing Announces 20% Dividend Hike: Time to Buy the Stock?

Zacks Equity Research
Boeing (BA) hikes quarterly dividend by 20.4% and authorizes a new stock repurchase plan of $18 billion

The Boeing Co. BA has boosted its quarterly dividend by 20.4%. Also, it has authorized a new stock repurchase plan of $18 billion, which replaces the existing share buyback program. These initiatives are likely to allow investors share the benefits of soaring airliner deliveries.

Dividend Hike

Boeing will now pay a quarterly dividend of $1.71 per share, up from $1.42 paid earlier, bringing the annualized dividend to $6.84. The company will pay the revised dividend on Mar 2, 2018 to stockholders on record as of Feb 9.

Notably, Boeing has increased its dividend per share by more than 250% over last five years. Also, the company has been consistently paying dividends to shareholders each quarter for over 75 years.

In fact, this aerospace behemoth began offering dividend hikes from 2011. Boeing’s stable returns during the economic downturn also impressed investors. Last year, the company increased its dividend by 30% after witnessing a nominal increase in the range of 15-20% in the last couple of years. Again, in 2013, the company had gifted investors with a massive 50% hike. It is thus clear that the aerospace major is not exactly new to unusually high dividend hikes.

Going forward, an accelerated rate of delivery is expected to enable Boeing to deploy the cash proceeds and continue raising its quarterly payout.

Share Repurchase Program

Boeing has declared the completion of its share buyback program for 2017. Meanwhile, the company has spent $9.2 billion out of the original $14 billion authorization announced last December. Markedly, the new approval takes the total authorization to $18 billion.

Boeing’s management is yet to decide the timing and volume of repurchases. Under the new share repurchase authorization, buybacks will take place over the next 24-30 months.

Our View

As the world’s largest aircraft manufacturer, Boeing holds a respectable position in the United States as well as the global aerospace and defense market. Not only did the company beat third-quarter earnings comfortably but it also raised the guidance for 2017, underscoring its strong cash flow position.

The raised dividend and the new buyback authorization indicate Boeing’s optimism on its large and diverse order backlog, which is expected to continue enjoying a conducive environment ahead. Amid budget volatility, uncertainties related to high-cost programs, risks associated with key project executions and order cancellations such moves are sure to win investor confidence.

The U.S. aerospace behemoth’s total deliveries during the first nine months of 2017 surpassed its archrival, Airbus Group SE’s EADSY figures.

Moreover, Boeing currently has a backlog of over 5,679 commercial jets as airlines plan to replace their entire fleets in upcoming years. This has urged the company to increase its rate of production to meet demand and ensure a steady source of income.

Price Movement

Shares of Boeing have surged 80.1% over the last 12 months, outperforming the broader industry’s gain of 40.7%. This could be because of the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

The stock also performed better than General Dynamics Corporation GD and Lockheed Martin Corp. LMT, which missed the industry mark.

Zacks Rank

Boeing carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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Boeing Company (The) (BA) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
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