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Welcome to STop, the Seattle Times Opinion blog where our editorial writers and editors share their evolving thoughts on a variety of issues. STop is a place where opinion writers and readers can exchange views and readers can learn more about how editorial positions are formed.

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June 28, 2005

What's a Share in Boeing Worth?

I note that Boeing is buying back more shares. Maybe that answers, at least in part, a question Iíve long had about Boeing stock and stock in other companies like Boeing. That is, whereís the value?

A stock is a share in a business. You buy it normally with the idea that when you want to sell, someone will buy it from you, based on how well the business is doing. But at some point there has to be some value given to the owner of shares, or else why would anyone want to own them? This could be several things. The company could be sold, so that you were cashed out. Or you could get a dividend from the company, either a special dividend as a disbursement of assets or an ordinary dividend as a share in the stream of earnings.

At todayís price Boeing stock pays a dividend of 1.6 percent. Thatís not much. If were some little company, with a chance of becoming 20 times bigger, it would not be paying a dividend at all and we would not care because the payout would be in the future. But this is Boeing, a mature company. The future is now.

What, then? Is Boeing a candidate to be sold? I donít think the government would let it be sold. When T. Boone Pickens made a run at it back in about 1988, the Washington State Legislature chased him off, and it made it clear that it was willing to violate the state constitution to do so. Maybe Iím naive here, and Boeing could be sold to a legitimate U.S. buyer like, say, General Electric. (Certainly not to a Chinese company.) But I have never heard speculation of it.

But if there is almost zero chance of Boeing being acquired because it is so big, and is in a politically sensitive business, why is it at $65 a share, which pushes its dividend yield down to 1.6 percent? Where is the value to the stockholder? If you say the value is the assets, or the knowhow, or the market positionóthe stockholder doesnít get any of that. Why should he be willing to pay for it?

He is, because other people are. A circle.

Boeing's planned buyback of 5 percent of its shares is a payment of corporate cash to shareholders. Is that what keeps Boeing stock up? I covered business for years, and I remember these announcements about buybacks, and they never seemed to move stock prices very much. Is it because they were anticipated? Is the yield only 1.6 percent because everyone thinks Boeing will raise its dividend?

Or is Boeing stock, and much other stock, priced with only a vague relation to dividends and the prospect of buyout or other payment of corporate cash--and, if so, why?

Someone please tell me what I'm not seeing here.

Respond to Bruce.

 
Posted by Bruce Ramsey at June 28, 2005 06:36 PM



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