UPDATE 3-Boeing announces $10 billion buyback, raises dividend

Mon Dec 16, 2013 10:10pm EST

* Buyback to occur over next 2-3 years, beginning 2014
    * Increases dividend by 50 percent
    * Many U.S. companies doing buybacks


    By Alwyn Scott
    SEATTLE, 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.
    The share repurchase represents about 10 percent of Boeing's
outstanding stock, ranking it in the middle of buybacks by large
U.S. companies, which are on a stock-buying spree this year.
    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 amount adds to about $800 million
remaining from the company's 2007 stock repurchase
authorization, and buying 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. 
    The increased payouts come as the company tries to clinch a
labor contract with its unionized machinists that would ensure
the 777X is built in the Seattle area. The 31,000 local union
members have rejected Boeing's offer, largely because it would
switch their defined-benefit pension to a 401(k)-style plan.
    "Boeing is looking forward to a period of long-term
financial stability made possible primarily by the men and women
of District 751," said Tom Wroblewski, president of the
International Association of Machinists, District 751, which
represents the Seattle-area workers.
    "While other production sites have failed to hit their
targets, we have delivered record numbers of airplanes at record
profit margins this year, helping drive the stock price to
record highs," he added. "Given this, I feel it's wrong for the
company to try to take away pension benefits that provide our
members with their own future financial stability."
    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.
    U.S. companies in the Standard and Poor's 500 authorized
nearly $123 billion in buybacks in the second quarter, the most
since the third quarter of 2011, according to FactSet Research
Systems Inc.
    Among Dow Industrial Average companies, Boeing's $10 billion
repurchase was in line with General Electric Co, Pfizer
Inc, Intel Corp and Goldman Sachs Group Inc
. But was far smaller than $40 billion for Microsoft Corp
 and $17 billion for Home Depot Inc.
    But among peer companies authorizing buybacks of $10 billion
or more, Home Depot is giving shareholders a much larger boost.
It is buying back 15 percent of its outstanding shares. In
comparison, GE's $10 billion buyback will purchase just 4
percent of outstanding shares.
    
       Company          Buyback      Percent outstanding
                         amount            shares
 Home Depot           $17,000,000,                    15%
                              000   
 Goldman Sachs Group  $10,808,000,                    14%
 Inc                          000   
 Cisco Systems        $15,000,000,                    14%
                              000   
 Microsoft            $40,000,000,                    13%
                              000   
 Walt Disney          $16,027,000,                    13%
                              000   
 Coca-Cola            $18,920,000,                    11%
                              000   
 Merck                $15,000,000,                    11%
                              000   
 Boeing               $10,000,000,                    10%
                              000   
 Intel Corp           $10,000,000,                     8%
                              000   
 IBM                  $15,000,000,                     8%
                              000   
 JPMorgan Chase       $15,000,000,                     7%
                              000   
 AT&T                 $11,007,000,                     6%
                              000   
 Wal-Mart             $15,000,000,                     6%
                              000   
 Pfizer Inc           $10,000,000,                     5%
                              000   
 Johnson & Johnson    $12,900,000,                     5%
                              000   
 General Electric Co  $10,000,000,                     4%
                              000   
                                                         
 Source: Thomson                                         
 Reuters