The recent strong stock buybacks of Boeing (NYSE:BA) had already increased the net payout yields on the stock to over 9%. The decisions to boost the dividend and buyback authorizations should further enhance the yields. Ironically, the stock was under pressure due to fears that global airlines will cancel orders for fuel efficient airplanes with the plunging fuel costs.
After a strong spurt in the stock during 2013, Boeing has traded mostly sideways in 2014. The recent drop actually has the stock down roughly 9% for the year. The stock though might get a boost into year end with the company signaling the commercial aviation cycle remains in full force via a big boost to the capital distribution plan.
Capital Distribution Plan
After the close on Monday, Boeing announced the authorization for a share repurchase plan of $12 billion along with a 25% increase in the quarterly dividend to 91 cents per share. The annual dividend yield jumps to 3.0%. The higher dividend is first payable March 6, 2015 to shareholders of record as of February 13, 2015.
The new $12 billion buyback replaces the approximately $4.8 billion remaining on the previous plan. Also, Boeing announced it completed the repurchase of $6 billion worth of shares during 2014. Based on the $5 billion repurchased through the first three quarters of the year, the updated numbers suggest the company bought $1 billion worth during Q4.
Naturally for buybacks to matter, the company has to follow through with the announced plans. Based on the recent past, Boeing has a solid history of utilizing the cash available under the buyback authorization plans.
With the stock price flat to down during 2014, the soaring buybacks have the net payout yields up to a very attractive 9.4%. The below chart showcases the soaring yields that will rise even further with a higher dividend yield and the potential for larger buybacks in 2015.
Based on the bigger capital distribution plans of Boeing, the airplane manufacturer offers an outstanding yield to investors in a low interest rate environment. At a yield approaching 10%, Boeing has the potential to crack the top 10 net payout yield stock list. Investors should definitely use recent weakness in the stock to purchase the high yielding stock.
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