Boeing Boosts Buyback Program, Dividend

Boeing Co.'s board on Monday raised its cash dividend by 20% and lifted an existing stock buyback program by $2 billion, underscoring the cash-generating potential of raising its commercial aircraft production rate.

The Chicago-based company spent $6.75 billion this year on share buybacks out of the original $12 billion authorization announced last December. The latest increase brings the approved total to $14 billion.

Boeing has prioritized investment in development and higher production of new commercial planes, such as revamped versions of its 737 and 777 jets, over shareholder returns and deal-making, but will have returned around 100% of 2015 operating cash generation to investors this year.

The increased dividend and larger buyback authorization indicate Boeing expects what analysts have called a "super cycle" of commercial aircraft orders to continue, as well as expressing confidence in plans to boost production of the 787 Dreamliner.

Boeing shares came under pressure last summer from investors concerned about the exposure of its $485 billion commercial-airplane backlog to airlines in emerging markets.

Boeing had lagged behind the buyback programs of some peers in the U.S. aerospace and defense sector before ramping up in 2013, and the latest top-up indicates it could accelerate activity as executives continue to describe the stock as undervalued.

The company said it expected to resume buyback activity in January, with the balance of repurchases under the expanded program likely to take place in the next two to three years. The quarterly dividend was raised to $1.09 a share, continuing a run of five years of higher payouts.

U.S. industrial firms have continued to pour cash into buybacks despite the surge in merger and acquisition activity this year, and aerospace and defense companies have been particularly active in recent years, in part because of tailwinds from pension regulations that have reduced their funding commitments.

Pentagon leaders have been critical of the level of buyback activity among defense companies—military sales account for a third of Boeing revenues—arguing companies should direct more funding to internal research and development. Companies have retorted that the Defense Department needs to be more explicit about where extra funding should go, and improve incentives to encourage investment.

Northrop Grumman Corp. and Lockheed Martin Corp. have led the surge in buyback activity, with the former retiring a quarter of its shares over the past three years and in September securing authorization to buy back another $4 billion in stock.

Boeing shares closed down 1.1% at $143.05 Monday, recovering some of its early losses, and were recently up 1.2% at $144.76 in aftermarket trade.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

December 14, 2015 18:55 ET (23:55 GMT)

Northrop Grumman (NYSE:NOC)
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