Boeing Wasted US$60 Billion
The big question that arises, however, is why a company such as Boeing booking significant profits in previous years needs to borrow money
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March 24, 2020 - by Dhierin Bechai for seekingalpha.com
- Prioritizing returning cash to shareholders left company vulnerable to shocks.
- This practice should change once Boeing resolves the current crisis.
- Boeing left cash poor after returning $60 billion to shareholders.
In a recent report, I looked at the bailout package that Boeing (NYSE:BA) requested to support the aerospace manufacturing industry, and mentioned that in a piece I had already written earlier, I found that Boeing returned $60B in recent in the past five non-crisis years and 2019. Earlier I had a look at what Boeing did with the $25B it borrowed during the 2019 fiscal year.
It turned out that Boeing spent a considerable amount of new borrowings to make debt repayments, while roughly 30% was used to return value to shareholders in the form of dividends and share repurchases.
That's a decision that, under current circumstances, cannot be supported by the operational performance of the company but can find some support if we consider Boeing's risky move to fund the pension plans with its own shares a couple of years ago.
The big question that arises, however, is why a company such as Boeing booking significant profits in previous years needs to borrow money. That will be...
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