Delta Air Lines Offers 2.4% Dividend Yield, 9%-Plus One-Year Total Returns (DAL)
By: Ned Piplovic,
While experiencing substantial share price volatility over the past few years, Delta Air Lines, Inc. (NYSE:DAL) managed to deliver steady total returns driven by an overall share price uptrend, rising dividend income payouts and a dividend yield above industry average.
Delta Air Lines started dividend distributions in August 2013 and has boosted its annual dividend payout every year since then. The company’s current dividend payout ratio of 23% indicates that the company uses less than one-quarter of its earnings to cover dividend distributions. While the 23% payout ratio figure is below the 30% to 50% range generally considered by investors as sustainable, the current figure is higher than the company’s 18% average payout ratio over the past five years.
The payout ratio increase denotes that Delta Air Lines is paying a larger portion of its earnings to shareholders. However, the low current figure leaves plenty of room for Delta to increase its payout ratio and still keep it the sustainable range. Regardless of whether Delta enhances its payout ratio or keeps it at the same level, the current level is a good indication that the company should be able to support its rising annual dividends and extend its current streak of annual dividend hikes into the near future.
Interested investors should evaluate the Delta Air Lines investment opportunity against alternative prospects and confirm that DAL fits well with their specific portfolio strategy. Investors who decide that Delta is the right fit should act before the upcoming May 1, 2019 ex-dividend date. The company will distribute the next round of dividend distributions on the May 23, pay date to all investors that claim stock ownership prior to the ex-dividend date.
Delta Air Lines, Inc. (NYSE:DAL)
Headquartered in Atlanta, Georgia, and founded in 1924, Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo internationally. Delta Air Lines serves more than 180 million customers each year. Through its global network, Delta and the Delta Connection carriers offered service to more than 300 destinations in over 57 countries and operated a fleet of more than 800 aircraft as of March 2019. The airline is a founding member of the SkyTeam global alliance and participates in the industry’s leading transatlantic joint venture with Air France-KLM and Alitalia, as well as a joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights and services 660 locations in 130 countries. The company’s key hubs and markets are Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Mexico City, Minneapolis/St. Paul, New York-JFK and LaGuardia, London-Heathrow, Paris-Charles de Gaulle, Salt Lake City, São Paulo, Seattle, Seoul and Tokyo-Narita.
The company’s current $0.35 dividend distribution is 14.8% above the $0.305 quarterly payout amount from the same period one year ago. The new quarterly payout amount is equivalent to an annualized dividend of $1.40, which corresponds to a 2.42% forward dividend yield. This dividend yield is 54% higher than Delta’s own 1.56% five-year average yield.
Furthermore, in addition to outperforming its own dividend yield average over the past five years, Delta’s current yield also outperformed the 1.95% average yield of the entire Services sector by 23%. Additionally, Delta’s current yield is the third highest yield in the Airlines industry segment and nearly double the segment’s 1.22% yield average. Even compared to the 2.04% average yield of the segment’s only dividend-paying companies, Delta’s current dividend yield is still nearly 18% higher.
Since beginning dividend distributions in August 2013, Delta enhanced its total annual dividend distribution amount nearly six-fold. That advancement over the past six consecutive years is equivalent to an average growth rate of 34.2% per year. The strong dividend growth contributed to robust total returns on shareholders’ investment as well.
Just over the trailing 12-month period, dividend distributions combined with a 6.6% asset appreciation to deliver total returns of 9.2%. Longer-term returns fared even better for Delta’s shareholders. The company rewarded its shareholders with a total return of more than 37% over the past three years. Additionally, the shareholders received total returns of nearly 78% over the last five years.
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