Boeing Boosts Dividend 10%, Resumes $3.6 Billion Buyback

Boeing Co. (BA) resumed a $3.6 billion stock-buyback plan that was suspended amid delays on its 787 Dreamliner, and analysts predicted more cash will be returned to shareholders as profit rises along with jet deliveries.

“Investors are certainly expecting more cash to come their way as the 787 and other legacy aircraft start to ramp up,” Carter Leake, an analyst with BB&T Capital Markets, said yesterday in a telephone interview. “This is the Boeing story. It’s more about free cash flow generation than earnings.”

The share repurchases announced yesterday pick up the remaining balance of a $7 billion program unveiled in October 2007, the month Boeing disclosed the first of what would become more than three years of delivery delays for the 787 Dreamliner. The Chicago-based company also said it will increase its quarterly dividend by 10 percent to 48.5 cents a share.

Boeing said it will buy back as much as $2 billion of its stock in 2013. That will be the first repurchases since the plan was suspended in the first quarter of 2009, Yair Reiner, an analyst with Oppenheimer & Co., said yesterday in a note to clients. The buyback and dividend increase follow through on Boeing’s intention to announce a plan by year-end to return more cash to shareholders.

Photographer: Andrew Harrer/Bloomberg

Boeing’s buyback revives a program authorized by directors in October 2007, the month it disclosed the first of what would become more than three years of delivery delays for the 787 Dreamliner. Close

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Photographer: Andrew Harrer/Bloomberg

Boeing’s buyback revives a program authorized by directors in October 2007, the month it disclosed the first of what would become more than three years of delivery delays for the 787 Dreamliner.

The dividend and the amount of buybacks were lower than estimated, Carter Copeland, a Barclays Plc analyst, wrote in a note yesterday. Copeland said the market had expected a dividend increase of 12 percent to 15 percent and share repurchases next year of as much as $2.5 billion.

“It appears to us that this presumed positive announcement fell slightly short of expectations,” Copeland said in the note. Boeing shares may “modestly underperform” in today’s trading, he said.

Defense Cuts

The company may have been cautious because of the potential for defense cuts and higher taxes that will take effect at the beginning of the year unless Congress reaches an agreement to head off the so-called fiscal cliff, Leake said.

“If sequestration and fiscal-cliff discussions go better than expected, they can always up this,” he said.

Boeing probably will buy back the $2 billion of shares “fairly quickly” and announce a new program heading into 2014, Peter Arment, an analyst with Sterne, Agee & Leach Inc., said in a note.

“We think there will be more to come,” wrote Arment, who recommends buying the stock.

Dreamliner Delays

The cash deployment comes as Boeing stock has suffered from delays to the new Dreamliner model that has hurt the company’s credibility. The shares are down about 26 percent since the first delay was revealed in October 2007.

The stock was little changed in extended trading after rising 0.9 percent to $74.65 at the New York close. The shares have gained 1.8 percent this year, compared with increases of 21 percent for European Aeronautic, Defence & Space Co. (EAD), the parent of Airbus, and 14 percent for the Standard & Poor’s 500 Index.

Boeing held $11 billion in cash as of Sept. 30, which could swell as the company completes a planned 60 percent production increase in the four years ending in 2014 to work through a $307 billion order backlog.

Even though the buybacks and dividend increase may have been a “shade” less than forecast, it foretells good cash generation for next year, Howard Rubel, an analyst with Jefferies & Co., said in an interview.

“They painted the corner of the plate,” Rubel said of the repurchase target and dividend. “It wasn’t down the center of the plate, but it’s still a strike.”

To contact the reporters on this story: Susanna Ray in Seattle at sray7@bloomberg.net; Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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