UPDATE 1-Boeing announces $10 billion buyback, raises dividend

Mon Dec 16, 2013 6:09pm EST

Dec 16 (Reuters) - Boeing Co's board raised the company dividend about 50 percent on Monday and approved $10 billion in new share buyback authority that the company said it would use in the next two to three years.

Boeing shares rose about 2 percent in extended trading after the news. They closed at $134.72 on the New York Stock Exchange on Monday.

The increases in dividends and share repurchases "reflect sustained, strong operational performance by our businesses, increasing cash flow, and our confidence in the future," Boeing Chief Executive Jim McNerney said in a statement.

The new repurchase total is in addition to about $800 million remaining from the company's 2007 stock repurchase authorization, and will begin in 2014, Boeing said. The quarterly dividend is 73 cents per share, up from 48.5 cents.

Boeing is enjoying a surge in revenue and cash as it ramps up commercial jet production, with a target of delivering a record 635 to 645 aircraft this year. Those gains help offset declining U.S. military spending, which is hampering Boeing's defense businesses.

The company is also preparing to invest billions of dollars in two new models, the narrow-body 737 MAX and the wide-body 777X.

News of the increased payouts to shareholders come as the company tries to clinch a labor contract with its Seattle-area machinists that would ensure the 777X is built in there. The 31,000 union members have rejected Boeing's offer, largely because it would switch their defined-benefit pension to a 401(k)-style plan.

The International Association of Machinists declined to offer immediate comment on the dividend and repurchase news.

For investors, the rise in returns "speaks to the belief that the company has line of sight to improving its operating performance," said Howard Rubel, an analyst at Jefferies & Co. Inc. The buyback amount matched his forecast, and the dividend was larger, he said.

Robert Stallard, an analyst at RBC Capital Markets, said the $10 billion repurchase over two or three years was below the $6.5 billion in repurchases he expected in 2014.

"So although this news will probably be welcome, the impact on consensus EPS estimates may not be as positive as expected," Stallard added in a note to clients.

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