Boeing Company (NYSE: BA) recently increased its dividend by 25% from $0.73 to $0.91, putting its annual dividend rate at $3.64.
The dividend jump outstripped estimates by a wide margin, which placed the latest increase at a quarterly rate of $0.83.
Dividends will be paid out on March 6th to shareholders who have purchased stock on record by February 13th.
In a related move, the aerospace company expanded its share repurchase program from $10 billion to $12 billion, the largest ever of its kind.
Boeing is known for buying back shares from stockholders. Out of the original $10 billion set aside for share buybacks, BA only spent $5.2 billion of it.
The $4.8 billion remainder was put towards increasing the company’s dividend, which not only restored the waning confidence of current shareholders but also increased the incentive for new investors to purchase Boeing’s stock.
Despite only spending just over half of the allotted $10 billion, Boeing altered the program to include a 20% increase. The renewed $12 billion initiative is anticipated to last two to three years.
Riding the good news, BA’s stock price leapt from $122 to $125 — about 2.5% — during after-hours trading.
Unless the world’s largest plane manufacturer has another surprise announcement up its sleeve, you can count on another generous quarterly dividend boost once the $12 billion share repurchase plan runs its course.
The one-two punch of these announcements marks a huge sign of rising confidence for Boeing’s cash outlook in the upcoming year — a sign that’s been long sought-after since commercial jet production was ramped up to record pace.
In October, Boeing announced that it plans to produce between 715 and 725 jets this year, approximately a 10% increase over the 648 jets sold last year and the most sold by any airplane manufacturer in less than a year.
The penchant for breaking production records likely stems from the $4.8 billion surplus from the share buyback program and such popular models as the 737 and 787 being sold out through the end of the decade.
Additionally, Boeing’s ambition will help erase its fall from grace on the Dow Jones Industrial Average in 2013 from the memories of current and potential shareholders.
Boeing promised its cash flow would be “very strong” in this year’s fourth quarter, and Monday’s big moves signaled it was confident about arriving at its goals.
Meanwhile, in Space…
This past September, NASA selected Boeing to receive the lion’s share of the $6.8 billion Commercial Crew Transportation Systems (CCTS) contracts to transport American crews to and from the International Space Station (ISS) as soon as 2017.
To be exact, Boeing’s share of the contract is worth $4.2 billion, while Elon Musk’s SpaceX contract is worth $2.6 billion.
CCTS marks the beginning of the end of the United States’ reliance on Russia to launch astronauts to the ISS at a cost of more than $70 million per seat, and it should allow the station’s current crew of six to grow, enabling more research aboard the unique microgravity laboratory.
As part of the contract, Boeing has designed a capsule called “CST-100,” capable of carrying up to seven passengers and being reused, as opposed to the expensive one-and-done method heavily employed in the past. The capsule’s name stands for “Crew Space Transportation” and 100 kilometers, or 62 miles — the altitude boundary recognized as the beginning of outer space.
Less than three months later, Boeing completed the first milestone for CCTS as part of a lengthy series of rigorous protocols created to insure that the company’s operations are held to the same standard that NASA requires of itself.
It’s the first among many milestones Boeing must achieve in order to fulfill its share of the contract, including flight tests from Florida’s Space Coast and successful transportation of crew and cargo to the ISS.
Once all of the protocols are met, NASA will continue moving towards regularly using Boeing to get astronauts and cargo to the ISS in a concerted effort to shift the responsibility of stellar transportation into the capable hands of aerospace companies.
It’s my hope and the hope of many others that in a relatively short amount of time — mere decades from now — a new era of common access to zero gravity and low-orbit space travel will be ushered in.
Like the dawn of commercial airlines before it, these opportunities will only be available to the most rarefied private parties at first. But as the technology becomes cheaper and more available, as it inevitably will, it could become the norm of travel.
At that point — as it is the pioneer of this revolutionary, disruptive technology — Boeing’s upside will likely be somewhere in the exosphere along with the astronauts and cargo it brought up to the ISS in CST-100s all those years before.
