Expedia spun off from Microsoft in 1999 and is now one of the strongest players in the OTA industry with a market cap of $14.95 billion. The company has grown rapidly due to strategic and careful acquisitions of favorable competitors such as Orbitz International and Travelocity in the past two years. The company has also spent well on marketing its capabilities, making it the preferred choice for customers as well as advertisers.
Expedia’s stock has also soared in the past two years, backed by its strong growth. In the last year, Expedia’s stock has gained ~40%, while its competitors such as Priceline and TripAdvisor have struggled to keep pace with market returns. PCLN gained a mere 7%, Ctrip (CTRP) gained 10%, and Trip Advisor (TRIP) lost ~30%. Year-to-date or YTD 2015, Expedia has already generated 40% returns while Priceline has 9% and TripAdvisor has negative returns. Ctrip, however, has seen the highest gain of ~45%, YTD. The Consumer Discretionary Select Sector SPDR (XLY) has gained 3% in the same period.
Share repurchases and dividends
Expedia has been consistently returning cash to its shareholders despite investing in acquisitions and building its portfolio. The company has been more active in announcing share repurchases than dividends. This helps the company return cash as well as improve its EPS. The company has a conservative balance sheet and a solid credit profile.
As the graph above shows, the company has already paid $332 million for shareholders in the form of dividends and share repurchases for the 12 months up to the end of second-quarter 2015. The company announced a cash dividend hike at $0.24 for its investors. The company currently has a dividend yield of 0.85%, which is a 33.33% increase over the prior quarter.