Growing dividend rate
Dividend payments and share repurchases have been key strategies for Delta Air Lines (DAL) to enhance shareholder wealth. The company’s dividend payment rate has been among the fastest-growing rates in the industry.
From 2013 to 2018, Delta’s dividend grew at a compound annual growth rate of over 42%. Last year, the airline’s annualized dividend rate was $1.31 per share, which was 29% higher than what it paid in 2017.
Delta has a dividend yield of 2.5%, which is the highest among its peers. Alaska Air Group (ALK) has a dividend yield of 2.4%, while American Airlines (AAL) and Southwest Airlines (LUV) have dividend yields of 1.2% each.
Delta’s dividend payout ratio of 25% is the second-highest ratio among its peers (IYT). With a payout ratio of 40%, Alaska Air Group tops the US air carriers. Southwest Airlines and American Airlines are third and fourth with payout ratios of 15% and 13%, respectively.
For the past five years, Delta has also been aggressive on the share buyback front to enhance shareholders’ wealth. Share repurchases are a tax-efficient way to create wealth for shareholders.
Delta initiated its first share repurchase program in 2013. Since then, the company has repurchased ~$10.5 billion worth of its common stock until the first quarter.
In an investor update released on April 2, Delta discloses that it has bought back $1 billion worth of its common stocks during the first quarter. The company has returned $1.6 billion to shareholders through dividend payments and share buybacks.