Delta Air Lines’ dividend yield
Apart from looking for capital gains, long-term investors 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 May 9, DAL’s current dividend yield is ~2.4%, the highest level since the company began to pay dividends on a quarterly basis. Its peers American Airlines (AAL), Southwest Airlines (LUV), and SkyWest (SKYW) have current dividend yields of 0.92%, 0.93%, and 0.7%, respectively. DAL’s dividend yield is much higher than those of its peers. It’s also higher than the yields generated from one-year Treasury bonds, giving investors an alternative investment option.
At current crude oil prices, airline stock prices generally don’t rise. DAL could increase its dividend rate in the next quarter, resulting in a further rise in its dividend yield.
DAL’s dividend yield trend
DAL’s dividend yield has been on a major upward trend, growing from 0.7% in 1Q14 to its current level of ~2.4%. The primary reason for the upward trend has been the higher growth in DAL’s dividend while its stock price growth hasn’t been so robust, resulting in DAL’s dividend growth rate outperforming its price growth. With DAL’s steady free cash flow, the upward trend in the dividend rate and the dividend yield is expected to continue. Typically, DAL has raised its dividend rate 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 May 9.
In the next article, we’ll look at analysts’ views on Delta Air Lines.