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Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Dividends From the Sky

At first, the idea would seem to be a bit of a joke. Airlines paying dividends? How could this be done in such a capital-intensive, yet not historically stable, industry? But a select few airlines pay their shareholders a dividend. Here, we will take a look at what these airline dividends mean.

Four rather different airlines

In this industry, dividend-paying is the exception, not the rule, because of the need for cash to acquire aircraft and manage debt. Nonetheless, these four airlines pay, or are about to pay, their shareholders a dividend.

Airline Delta Air Lines, Inc. (NYSE:DAL) Southwest Airlines Co. (NYSE:LUV) WestJet Airlines Ltd. (TSE:WJA) SkyWest, Inc. (NASDAQ:SKYW)
Quarterly payment $0.06 USD $0.04 USD $0.10 CAD $0.04 USD
Annual yield 1.33% 1.15% 1.78% 1.15%


Airline industry followers will notice that the only large-scale legacy airline on this list is Delta Air Lines, Inc. (NYSE:DAL). But when one thinks about legacy airlines, that is not too surprising. Legacy airlines are known for massive capital consumption, monstrous debt loads, and above all, bankruptcies.

Delta Air Lines, Inc. (NYSE:DAL)

But Delta Air Lines, Inc. (NYSE:DAL) has made strides to turn around the image of the legacy airline. Net debt is on target to be reduced by more than half from 2009 highs, and the airline’s decision to buy an oil refinery is expected to reduce fuel costs. As a result, Delta Air Lines, Inc. (NYSE:DAL) has launched a plan to return $1 billion to shareholders, half in the form of dividends, and half as share buybacks.

The next airline on the list is Southwest Airlines Co. (NYSE:LUV), an airline that has never sought bankruptcy protection and is currently approaching 40 straight years of profitability. With a dividend of $0.04 per quarter, few investors would be buying Southwest for the income, but the airline’s move to increase that dividend from $0.01 per quarter on May 15th of this year reflects Southwest’s desire to provide shareholder returns, and is closer to the dividend declared by Delta Air Lines, Inc. (NYSE:DAL).

Perhaps the closest airline to Southwest Airlines Co. (NYSE:LUV) would be Canada’s WestJet, which offers one of the highest dividends in the airline industry. As the name implies, WestJet did most of its early flying in Western Canada, but has since expanded east, targeting the Toronto City Airport as its next destination. Despite all of this expansion, WestJet still pays a dividend to its investors, most of whom are satisfied with the multibagger returns the stock has generated over the last decade.