Yahoo Finance Will Southwest Airlines Increase Its Dividend Payouts?
Southwest Airlines' 1Q16 Results: What the Analysts Are Saying
Consistent dividends
Southwest Airlines (LUV) has been profitable for more than ten years. This is a significant feat in the airline industry, which has been known to be a destroyer of capital. Southwest has used this profitability to return capital to its shareholders and has consistently paid dividends since 1980.
On the other hand, most of its peers do not pay dividends at all. The airlines that pay dividends have only started doing so recently.
Dividend yield
However, Southwest Airlines (LUV) has one of the lowest dividend yields among the peers that do pay dividends. LUV’s current dividend yield stands at 0.8%. Alaska Air Group (ALK) boasts the highest dividend yield of 1.3%. American Airlines (AAL) and Delta Air Lines (DAL) each offer a dividend yield of 1%.
Cash dividend ratio
Southwest Airlines’ cash dividend ratio stands at 11.6% as of the end of 2015, indicating its ability to sustain its dividend payouts. However, the ratio is lower than AAL’s 25%, but it’s higher than DAL’s and ALK’s 9%.
This ratio is calculated as cash flows over dividends paid, and it measures the ability of the company to pay dividends. A ratio of less than 1 indicates dividend payouts higher than the company’s cash flows, which may be difficult to sustain in the future.
Outlook
Southwest Airlines (LUV) has continuously increased its dividend payouts since 2012. It increased its dividend by 50% in 2012 to $0.02, by 333% in 2013 to $0.13, by 69% in 2014 to $0.22, and by 27% in 2015 to $0.28.
Analysts expect the company to continue this trend in 2016, increasing its dividend payout by 14% in 2016 to $0.32 per share. LUV forms 1% of the iShares Russell Mid-Cap Growth ETF (IWP).
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