Must-know: Alaska’s commitment to increase shareholder returns

Teresa Cederholm - Author

Dec. 4 2020, Updated 10:52 a.m. ET

Recent developments

Alaska’s (ALK) shares have been outperforming the Airline Index and the S&P 500 Index for the past few years. Shares of all major U.S. airlines including Delta (DAL), United (UAL), American (AAL), Southwest (LUV), and JetBlue (or JBLU) have performed well. The U.S. economy is growing. It provided strong support for air travel demand. The following recent developments contributed to increasing shareholders’ returns.

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  • Alaska’s adjusted earnings per share (or EPS) increased more than four times to $5.40 in 2013—from $1.23 in 2009.
  • Alaska’s share price increased by 29% since the beginning of the year. It was $47.36 on September 11, 2014. In the past five years, Alaska’s share price increased almost eight times from $6.64 on September 11, 2009.
  • It paid its first quarterly dividend since 1992 starting in 3Q14. It quarterly dividend was $0.20 per share. This was increased by 25% to $0.25 per share from March 2014.
  • In September 2012, the board authorized a $250 million share repurchase program. The program is expected to be completed by the end of 2014.
  • A two-for-one stock split was declared in June 2014. This was the company’s second stock split. The first one declared in March 2012. This means for every share held by a shareholder an additional share will be issued.

Increases in share prices and dividends provide direct benefits to shareholders. The increases in share prices give better returns. Share repurchases and stock splits provide indirect benefits. Share repurchases lead to a reduction in outstanding shares. This results in increased EPS. In a two-for-one stock split the price reduces by half and shares double. However, the market capitalization remains the same. Since the price reduction makes the stock more affordable, more stocks are purchased. This increases the prices.

Visit the Market Realist Airlines sector page to learn more about the airline industry.


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