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Boeing Enhances Shareholders’ Wealth with Dividend Hike, Buyback

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Dividend hike

The Boeing Company (BA) has consistently looked to enhance its shareholders’ wealth over the years. Continuing with this policy, the world’s largest air defense company raised its quarterly dividend by 20% on December 17.

Boeing’s quarterly dividend rate has now increased to $2.055 per share from $1.71. The company will pay the new dividend on March 1, 2019, to its shareholders of record as of February 8, 2019.

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Boeing has been consistently paying dividends for the past 80 years. Moreover, in the last six years, the company has been raising its dividend payout once every four quarters. In the past six years, the company’s dividend has soared ~325%. In the first nine months of 2018, it returned $2.98 billion in the form of dividend payouts. Last year, the company paid out $3.42 billion, almost triple the $1.26 billion it spent in 2011.

Despite a consistent increase in its dividend rate, Boeing’s yield has remained lower than those of its peers (ITA) due to its strong price appreciation. At its current market price, $316.13, the stock has an indicated dividend yield of 2.1%, lower than its peers Lockheed Martin’s (LMT) and General Dynamics’ (GD) 3.1% and 2.2% yields, respectively. Raytheon (RTN), another competitor, has a dividend yield of 2%.

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Share repurchase authorization

Apart from raising its dividend, the world’s largest aircraft manufacturer also increased its share repurchase authorization limit yesterday. The company will now buy back $20 billion worth of its common stock, up from the $18 billion approved in December 2017.

According to the company, it has repurchased ~$9.2 billion worth of its common stock so far this year. Boeing first initiated its share repurchase program in 2013. Since then, it has repurchased ~$41 billion worth of its common stock.

In the last few years, defense companies have been active in returning cash to shareholders, as their funding commitments toward pension regulations have reduced significantly. Apart from enhancing shareholders’ returns, dividend payments also boost investors’ confidence in a company, persuading them to either hold or buy its stock.

However, the Pentagon has often criticized defense companies for spending too much on dividend payments and share buybacks. It believes that more funds should be allocated to research and development projects.

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