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Will All Airlines Follow Delta on Dividends and Stock Buybacks

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By Jon C. Ogg Updated Published
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It was not that long ago that we were calling on major DJIA companies to lift their dividends in a CNBC interview. One sector we called on to begin dividend payments was the airline sector. While we assumed that United Continental Holdings Inc. (NYSE: UAL) would be the first to begin paying dividends, Delta Air Lines Inc. (NYSE: DAL) has jumped into the game of returning capital to shareholders.

Delta announced on Wednesday that it plans to create $5 billion in value for shareholders. In that plan, $1 billion will be returned to shareholders over the next three years and the airline declared a $0.06 per share common dividend as a result. Delta will also spend up to $500 million to repurchase its common stock.

Together, the dividend and buyback programs will return more than $1 billion of capital to shareholders over the next three years. The dividend yield is approximately 1.3% if you take the 3.3% gain to $18.68 on Wednesday.

Currently, Southwest Airlines Co. (NYSE: LUV) is the only airline that pays a dividend. Its yield is very small at 0.3%, but this may pressure Southwest to seek higher payouts as well.

Delta shares are up 3.3% at $18.68 and the stock hit a new multiyear high of $18.84 today. The $0.24 annualized payout compares to $2.64 in earnings per share expected from Thomson Reuters for earnings in 2013.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.

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