Highlights from Boeing’s AGM: dividends, Embraer deal, shareholder vote

Aircraft maker Boeing Co (NYSE: BA) told investors Monday morning at its annual general meeting they can forget about the notion of a resumption of dividends in the near-term.

New priorities

Boeing CEO David Calhoun told investors it may need to borrow more money within six months after already borrowing nearly $14 billion throughout 2020, according to the Financial Times. Instead of paying out shareholders a dividend, management’s “first priority” will be repaying its new debt.

The CEO cautioned a timeline of erasing all of its debt could span at least three years and up to five years — if not longer. It is difficult to predict the future but easy to confirm now “it’s going to be a while” before a regular dividend payment becomes “our number one priority.”

Put in perspective, Boeing returned $24.6 billion to shareholders in dividends on top of buying back $43.4 billion worth of share buybacks over the past 10 years.

Calhoun’s comments completely contrast what he said earlier in 2020 that Boeing has zero plans to cancel or suspend the dividend, unless “something dramatic changes,” FT reported. Suffice to say, a global pandemic could be classified in the “something dramatic” category as its revenue plummeted as airliners worldwide are unable to operate at anywhere near normal levels.

The depressed global travel industry could remain troubled for at least “two to three years” to merely return to 2019 levels, the CEO said. It will take another few years for the travel industry to re-establish a new long-term trend growth profile.

Embraer update

Boeing terminated over the weekend its joint venture agreement with Embraer. Calchoun commented Monday morning the decision was based on an inability for the two sides to agree on “critical unsatisfied conditions” stipulated in the master contract.

“It is really disappointing, but we had reached a point where continued negotiation was no longer helpful,” FT quoted the CEO as saying.

Activist shareholder scores a victory

Activist shareholder John Chevedden pushed for a proposal that Boeing permanently seperates the CEO and board chairman roles. While Boeing had no legal obligation to put the matter to a vote, it did so anyways.

Chevedden was on the winning side of the tally with 52% of investors backing the proposal. Similar votes failed in 2018 with 25% of the vote and 34% last year.

This time around, investors seem to be waking up to the fact that Boeing’s governance structure “has been less than ideal,” Teal Group’s aerospace analyst Richard Aboulafia told FT. The proposal should have been passed 20 years ago, but “better late than never.”