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Boeing Hikes Dividend by 20%, Raises Share Repurchase Value

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The Boeing Company (BA - Free Report) recently announced plan to reward its shareholders with a sturdy dividend hike of 20%. Alongside, management has authorized a new stock repurchase authorization program of $20 billion that replaces the existing share buyback program. These initiatives are likely to enable investors to benefit from soaring airliner deliveries.

Per CNBC, the company’s stock rose more than 1% in after-hours trading, following the announcement of the dividend hike.

Dividend Hike

Boeing will now pay a quarterly dividend of $2.055 per share, up from $1.71 paid earlier, bringing the company’s annualized dividend to $8.22. The company will pay the revised dividend on Mar 1, 2019 to stockholders on record as of Feb 8, 2019.

Notably, Boeing has increased its dividend per share by more than 325% over the past six years. Also, the company has been consistently paying dividends to shareholders for more than 80 years.

In fact, this aerospace behemoth began offering dividend hikes from 2011. Boeing’s stable returns during the economic downturn also impressed investors. In 2013, the company had gifted investors with a massive 50% hike. Hence, it is evident that this aerospace major is not exactly new to unusually high dividend hikes.

Going forward, an accelerated rate of delivery is expected to enable Boeing to deploy the cash proceeds and continue raising its quarterly payout to shareholders.

Share Repurchase Program

Boeing has declared the completion of its share repurchase program for 2018. Meanwhile, the company has spent $9 billion out of the original $18 billion authorization announced last December. So far, the company has repurchased more than 230 million shares over the past six years.

The new approval has authorized for share repurchase worth $20 billion, up from the prior plan. Management is yet to decide the timing and volume of repurchases. The new share repurchase authorization will resume in January 2019 and be made over the next 24 months.

Our View

Boeing's strong operational performance, financial stability and positive future outlook supports its continued investments made in innovative products and services, and select strategic acquisitions and partnerships that accelerate the company's overall growth. This, in turn, helps the aircraft giant stay on track with its balanced, value-creating cash deployment strategies.

Boeing’s raised dividend and the new buyback authorization indicate its optimism on its large and diverse order backlog, which is expected to witness a conducive environment ahead.

With Boeing successfully delivering a record 568 commercial airplanes during the first nine months of 2018, its cash flow has been exceeding expectations. The company generated $4.56 billion of operating cash flow at the end of third-quarter 2018, up 34.2% year over year. Such solid financial position must have enabled the company to reward its shareholders with the latest dividend hike and share repurchase.

Price Performance

Shares of Boeing have declined about 6.7% in a year compared with the industry’s decline of 6%. The outperformance was primarily led by significant demand for its military jets across the globe along with robust long-term demand for its commercial aircraft.

Zacks Rank & Other Stocks to Consider

Boeing currently carries a Zacks Rank #2 (Buy).

A few other top-ranked companies in the same sector are Aerojet Rocketdyne Holdings (AJRD - Free Report) , Teledyne Technologies Incorporated (TDY - Free Report) and Raytheon Company (RTN - Free Report) .

While Aerojet Rocketdyne and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy), Raytheon carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days.

Teledyne Technologies came up with average positive earnings surprise of 12.92% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 6% to $8.75 in the past 90 days.

Raytheon delivered average positive earnings surprise of 28.01% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 3% to $15.05 in the past 90 days.

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