Dividend yield trend
Long-term investors, apart from looking for capital gains, tend to prefer stocks with good dividend yields and growth. A dividend yield is what investors get in return for every dollar they invest in a company’s equity.
As of February 26, 2018, DAL’s current dividend yield was ~2.3%. Its peers American Airlines (AAL), Southwest Airlines (LUV), and SkyWest (SKYW) have current dividend yields of 0.75%, 0.86%, and 0.7%, respectively. DAL’s dividend yield is much higher than its peers. It is also higher than the yields generated from the one-year Treasury bonds. Investors who prefer stocks with a higher dividend yield may choose DAL.
DAL’s dividend yield trend
DAL’s dividend yield has been on an upward trend, growing from 0.7% in 1Q17 to the current yield of ~2.3%, reflecting a CAGR (compound annual growth rate) of 42.8%. The primary reason for the upward dividend yield is due to the higher growth in dividends. DAL’s dividend growth rate has outperformed its price growth. With DAL’s strong free cash flow, the upward trend is expected to continue. Typically, DAL has raised its dividend rate to be effective in the third quarter of every year.
Investors looking for exposure to DAL can invest in the iShares Transportation Average ETF (IYT), which has invested 3.4% of its portfolio in Delta Air Lines as of February 26, 2018.
In the next part, we’ll look at analysts’ views on Delta Air Lines.