Boeing Raises Dividend 20%, Sweetens Buyback as Rally Leads Dow

(Bloomberg) -- Boeing Co. is handing out more goodies to investors already flush from the company’s leap to the top of the Dow Jones Industrial Average -- all while plotting its biggest investment since the 787 Dreamliner more than a decade ago.

The quarterly dividend will rise 20 percent to $1.71 a share, Boeing said in a statement Monday, surpassing analyst expectations. Directors also authorized $18 billion in share buybacks, up from a $14 billion program they put in place a year ago.

Chief Executive Officer Dennis Muilenburg is making good on a promise to return cash gains to shareholders as the carbon-composite Dreamliner has become a rainmaker over the past year, ending years as a cash drain. The planemaker is also speeding factory output as it tries to profit from a record order backlog, which provides a cushion from the cyclical market swings that have hurt other industrial giants such as General Electric Co.

The strategy is nearing its biggest test yet as a major potential investment looms. Boeing directors are studying whether to move forward with their first all-new jetliner since the 787, which saddled the company with $30 billion in deferred costs after its tardy debut. Development costs for the proposed new plane would probably run between $10 billion and $15 billion, said aerospace analyst Richard Aboulafia.

The shares climbed 1.3 percent to $286.90 after the close of regular trading in New York. Boeing has outpaced Apple Inc. and Caterpillar Inc. with an 82 percent gain this year, the largest rise on the 30-member Dow.

Aircraft Investment

The aircraft under consideration by the board -- a proposed two-jet family dubbed the 797 by outsiders -- would be carefully timed so that development costs rise as spending tapers on upgrades of existing models that are currently in Boeing’s pipeline.

The Chicago-based company expects to generate $12.5 billion in cash this year as it accelerates output of the single-aisle 737, its largest source of profit, and as the first wide-body 777X starts to take shape. Those results should also get a boost from a dip in research and development spending, and a one-time $700 million tax benefit after Boeing spent $3.5 billion in treasury shares during the third-quarter to shore up its pension.

Boeing has raised its quarterly dividend more than 250 percent over the past five years, if the announcement is included in the tally. The new dividend will be payable March 2, 2018, to shareholders of record as of February 9, 2018.

The manufacturer said it has repurchased $9.2 billion worth of its shares this year from the $14 billion authorization approved in December 2016. The new $18 billion repurchase program is the largest in company history.

Since it embarked on the buyback spree in 2013, Boeing has spent more than $30 billion on its stock while the count of basic shares outstanding has shrunk 20 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren

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