Delta Air Lines terminal at airport
Source: Getty Images

After Its Profitable Quarter, Will Delta Restore Dividends?

By

Jul. 15 2021, Published 11:33 a.m. ET

Following its first profitable quarter since before the pandemic, Delta Air Lines (DAL) is seeing an uptick in investor interest. However, the company still hasn't restored dividends, a conflict that some traders can't get past.

Article continues below advertisement

When will Delta restore its dividends, and what can investors expect from DAL stock in the near future?

Delta sees profit for the first time since before the pandemic

The airline industry is crawling out of a traumatic year. A total of 1.8 billion passengers traveled globally last year, down from 4.5 billion in 2019.

Article continues below advertisement

Delta is one airline that's seeing some growth in the new year. The company managed to report a profit for the first time since 2019.

Delta still sees losses, keeps dividends on pause

Delta's latest earnings report showed corporate profit (excluding governmental stimulus), and its adjusted loss per share of $1.07 beat analysts' forecast of $1.38. Because of a recent uptick in travel, Delta performed better than expected.

Article continues below advertisement

Still, there's no sign of a dividend restoration. Delta paid out the most recent dividend for DAL stock on Mar. 12, 2020. At the time, its dividend yield was 2.8 percent and its EPS were $0.40. The company then halted its stock incentive when COVID-19 caused the industry to crumble.

When will Delta restore its dividends for investors?

It will probably take several profitable quarters and positive EPS for Delta to restore dividends. Right now, the company has intermittent profitability but has maintained negative EPS.

Article continues below advertisement

Analysts have upgraded DAL, but should you wait until dividends return before buying the stock?

Following Delta's stronger-than-expected performance, analysts upgraded the stock from "market perform" to "strong buy." This upgrade implies that these experts believe Delta stock will outperform the market by a substantial margin, most likely over the next year.

According to Raymond James airlines analyst Savanthi Syth, "We were somewhat cautious heading into the quarter due to the potential for cost volatility to weigh on investor sentiment." She added, "Following the earnings call on Wednesday, we believe expectations have been reset, albeit with some risk if the recovery stalls."

Article continues below advertisement

This "strong buy" rating comes with a price target of 42 percent higher than the stock's current market value. Investors willing to take on the aforementioned risk may find a DAL investment suitable. Others who are more interested in passive income strategies could wait until the dividend restoration, though we don't know when that's going to happen. This strategy also comes with risk, as it could mean entering at a higher, more volatile market value.

Much of the decision depends on your risk appetite. However, there's no denying that the future of Delta stock holds some action.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.