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Southwest Airlines Gets It: Higher Dividend, Higher Buyback
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Southwest Airlines Co. (NYSE: LUV) has just delivered what shareholders love to hear with a commitment to a higher dividend and a higher stock buyback. Unlike the spotty history of dividends among major airlines, Southwest said that this represents its 159th consecutive quarterly dividend payment.
The discount airline decided to increase its quarterly dividend by one-third. Its June dividend will be raised to $0.10 per share from the current level of $0.075 per share. This dividend’s history has been one of a shareholder return of late — in half of 2012 and 2013 it was just $0.01 per share per quarter, but that jumped to $0.04 in 2014. It then jumped to $0.06 and to $0.075.
The $0.40 annualized dividend should be more than sustainable, even considering its planned stock buyback. The company’s consensus analyst earnings per share estimates are $4.14 for 2016, $4.59 for 2017 and $6.17 for 2018.
Needless to say, Southwest still has massive room to boost its payout, if it decided to, plus Southwest has $3.5 billion or so in cash and investments. Annualized, this increased dividend amounts to approximately $255 million, based on approximately 632 million shares of common stock outstanding.
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