Please ensure Javascript is enabled for purposes of website accessibility

Why Boeing Stock Popped 5% Today

By Rich Smith - Dec 18, 2018 at 4:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Management hikes the dividend and announces a 10%-plus increase in buybacks.

What happened

Shares of aerospace giant Boeing (BA -4.93%) jumped as much as 5% in Tuesday trading before retracing to end the day still up a healthy 3.8%.

Investors appeared pleased with the announcement by Boeing this morning that its board has elected to raise the company's quarterly dividend payout 20% to $2.055 per share and increased its share buyback program to $20 billion.

Boeing 777 airliner in flight.

Boeing's stock is flying on news of new buybacks and a big dividend hike. Image source: Getty Images.

So what

Boeing's new dividend works out to $8.22 on an annual basis, which works out to a 2.5% yield at the stock's closing share price of $328.23 Tuesday -- more than 25% better than the average 1.96% dividend yield across all stocks listed among the S&P 500.

The $20 billion share buyback authorization represents a more than 11% increase over the $18 billion authorized last December. However, Boeing noted that it had already burned through "$9 billion worth" of the previous buyback authorization, so in fact, today's announcement represents more than double the amount of share value Boeing was currently authorized to pursue -- a big vote of confidence by Boeing's management in the belief that its stock is undervalued.

Now what

Boeing expects to buy back up to $20 billion worth of its shares over the next 24 months, beginning in early 2019. At current valuations, Boeing will be paying roughly 19.3 times trailing earnings to buy back its shares -- but only 13.2 times free cash flow.

Sounds like a bargain to me.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$125.54 (-4.93%) $-6.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.