Unusual Put Option Trade in Southwest Airlines Worth $125.1K

On February 17, 2023 at 11:01:57 (ET) an unusually large $125.10K block of Put contracts in Southwest Airlines (LUV) was bought, with a strike price of $35.00 / share, expiring in 28 days (on March 17, 2023). Fintel tracks all large options trades, and the premium spent on this trade was 2.52 sigmas above the mean, placing it in the 99.28 percentile of all recent large trades made in LUV options.

Analyst Price Forecast Suggests 31.24% Upside

As of February 16, 2023, the average one-year price target for Southwest Airlines is $46.47. The forecasts range from a low of $35.35 to a high of $67.20. The average price target represents an increase of 31.24% from its latest reported closing price of $35.41.

The projected annual revenue for Southwest Airlines is $27,204MM, an increase of 14.24%. The projected annual EPS is $3.28, an increase of 261.36%.

What is the Fund Sentiment?

There are 1660 funds or institutions reporting positions in Southwest Airlines. This is an increase of 27 owner(s) or 1.65% in the last quarter. Average portfolio weight of all funds dedicated to LUV is 0.23%, a decrease of 3.74%. Total shares owned by institutions decreased in the last three months by 0.31% to 514,544K shares. The put/call ratio of LUV is 0.89, indicating a bullish outlook.

What are large shareholders doing?

Primecap Management holds 52,198K shares representing 8.78% ownership of the company. In it’s prior filing, the firm reported owning 52,741K shares, representing a decrease of 1.04%. The firm decreased its portfolio allocation in LUV by 99.90% over the last quarter.

VPMCX – Vanguard PRIMECAP Fund Investor Shares holds 26,197K shares representing 4.41% ownership of the company. In it’s prior filing, the firm reported owning 26,257K shares, representing a decrease of 0.23%. The firm decreased its portfolio allocation in LUV by 8.54% over the last quarter.

T. Rowe Price Investment Management holds 18,213K shares representing 3.06% ownership of the company. In it’s prior filing, the firm reported owning 16,944K shares, representing an increase of 6.97%. The firm increased its portfolio allocation in LUV by 12.72% over the last quarter.

VTSMX – Vanguard Total Stock Market Index Fund Investor Shares holds 17,687K shares representing 2.98% ownership of the company. In it’s prior filing, the firm reported owning 17,454K shares, representing an increase of 1.31%. The firm decreased its portfolio allocation in LUV by 9.81% over the last quarter.

Price T Rowe Associates holds 15,748K shares representing 2.65% ownership of the company. In it’s prior filing, the firm reported owning 17,752K shares, representing a decrease of 12.73%. The firm decreased its portfolio allocation in LUV by 57.90% over the last quarter.

Southwest Airlines Declares $0.18 Dividend

On February 1, 2023 the company declared a regular quarterly dividend of $0.18 per share ($0.72 annualized). Shareholders of record as of March 7, 2023 will receive the payment on March 29, 2023. Previously, the company paid $0.18 per share.

At the current share price of $35.41 / share, the stock’s dividend yield is 2.03%. Looking back five years and taking a sample every week, the average dividend yield has been 1.40%, the lowest has been 0.83%, and the highest has been 2.76%. The standard deviation of yields is 0.42 (n=122).

The current dividend yield is 1.52 standard deviations above the historical average.

Additionally, the company’s dividend payout ratio is 0.79. The payout ratio tells us how much of a company’s income is paid out in dividends. A payout ratio of one (1.0) means 100% of the company’s income is paid in a dividend. A payout ratio greater than one means the company is dipping into savings in order to maintain its dividend – not a healthy situation. Companies with few growth prospects are expected to pay out most of their income in dividends, which typically means a payout ratio between 0.5 and 1.0. Companies with good growth prospects are expected to retain some earnings in order to invest in those growth prospects, which translates to a payout ratio of zero to 0.5.

The company has not increased its dividend in the last three years.

Southwest Airlines Background Information
(This description is provided by the company.)

In its 50th year of service, Dallas-based Southwest Airlines Co. continues to differentiate itself from other air carriers with exemplary Customer Service to a Customer base topping 130 million passengers in 2019. Southwest became the nation’s largest domestic air carrier in 2003 and maintains that ranking based on the U.S. Department of Transportation’s most recent reporting of domestic originating passengers boarded. In peak travel seasons during 2019, Southwest operated more than 4,000 weekday departures among a network of 101 destinations in the United States and 10 additional countries. In early 2020, the carrier added service to Hilo, Hawaii, and Cozumel, Mexico. Southwest began service to Palm Springs, Calif. and Miami on Nov. 15, and will begin service to two new seasonal destinations in Colorado, Steamboat Springs and Montrose (Telluride and Crested Butte) on Dec. 19, 2020. On Feb. 14, 2021, Southwest will begin service to Chicago (O’Hare) and Sarasota/Bradenton. Service from Savanah, Georgia and Colorado Springs will begin on March 11, 2021, and operations from Houston (George Bush Intercontinental) and Jackson, Miss. are anticipated to begin in the first half of 2021. The carrier issued its Southwest® Promise in May 2020 to highlight new and round-the-clock efforts to support its Customers and Employees wellbeing and comfort. Among the changes are enhanced cleaning efforts at airports and onboard aircraft, and face covering requirements for Customers and Employees. Additional details about the Southwest Promise are available at Southwest coined Transfarency® to describe its purposed philosophy of treating Customers honestly and fairly, and low fares actually staying low. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some carriers offer free checked bags on select routes or in qualified circumstances). Southwest does not charge change fees, though fare differences might apply. Southwest is one of the most honored airlines in the world, known for a triple bottom line approach that contributes to the carrier’s performance and productivity, the importance of its People and the communities they serve, and an overall commitment to efficiency and the planet. Learn more about how the carrier gives back to communities across the world by visiting Book Southwest Airlines’ low fares online at or by phone at 800-I-FLY-SWA.

This article originally appeared on Fintel

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