Boeing delights Wall Street, infuriates Seattle
Boeing Co. BA +0.70% announced after the close Monday it is boosting its dividend 50% to 73 cents a share from 48.5 cents. It also approved spending up to $10 billion to buy back shares.
The move sent loud and clear messages to two of the company’s key constituents: investors and labor.
Investors, especially the institutional ones that hold about 83% of Boeing’s stock, have been fussing for a little more largesse from the company since it’s doing so well. (Just last quarter, the aerospace company posted a profit of $1.16 billion, up 12% from a year earlier and its 16th straight earnings beat.)
Boeing clearly heard them. The $10 billion is the biggest lump of buyback money Boeing has ever set aside, topping the previous $7 billion program approved by the board in 2007, which still has about $800 million left in it.
According to aerospace analysts at Sterne Agee, investors had been expecting an annual buyback plan of about $3 billion to $4 billion, or double the 2013 plan. “Spreading the $10 billion over two years would be well above expectations at $5 billion per year, while a three-year program would be bullish but more in line with the consensus. … The dividend increase was also well above expectations, with a quarterly payout of $0.73 resulting in a dividend yield above 2% at current prices.”
The other message is to Boeing’s labor unions. It’s less conciliatory, made less than a week after labor talks in Seattle with the International Association of Machinists and Aerospace Workers, fell apart.
The 31,000-strong District 751 machinists union, Boeing’s biggest, last month rejected Boeing’s proposed contract concessions, which included swapping out their defined benefit-pension plan to a 401(k) plan. Last week union officials declined to take Boeing’s “best and final” offer to their membership for a vote, raising questions about whether the wing fabrication and assembly work for Boeing’s hot-selling 777X long-haul jetliner will be carried out at Boeing’s Everett plant just north of Seattle or shipped off to any of the dozens of non-union facilities elsewhere vying for the job.
Tom Wroblewski, local president of the International Association of Machinists, shared the following thoughts on Boeing’s priorities: “Boeing is looking forward to a period of long-term financial stability made possible primarily by the men and women of District 751,” Reuters reported. “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. 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.”
Wilson Ferguson, a 26-year Boeing employee and union representative, was more blunt, telling the Seattle Times: “If the company was in any way hurting, we would consider making some concessions. That’s just not the case. … Record profits. Record sales. Stock price is through the roof.”
Boeing BA +0.70% shares are up 81% this year, far outpacing a 21% advance by the Dow Jones Industrial Average over the same period. The stock was last up 1.2% Tuesday, landing it among the top gainers on the Dow.
So while Wall Street is celebrating Boeing’s decision to reward shareholders, the view from the shop floor is far less charitable. And, unless they can hammer out a deal with management, Boeing’s Seattle-area machinists risk seeing a huge, decades-long fabrication job slip away from Everett.
