An increase to a dividend can demonstrate significant confidence to investors, especially when it’s a large rate hike. For a company to make a substantial increase, it will need to be confident in being able to generate strong enough results to sustain the payout for the foreseeable future.
On Thursday, Delta Air Lines (NYSE:DAL) declared its latest quarterly dividend. At $0.15, the dividend, which is to be paid in August, will be 50% higher than what Delta was previously paying -- $0.10. With the increase, Delta’s dividend now yields 1.2%, which is close to the S&P 500 average of 1.3%.
In 2020, the company suspended its dividend due to the pandemic and when it restarted it in 2023, it was at a much lower rate ($0.10 versus $0.4025). Delta’s increase signifies that the travel industry is in stronger shape and that its business is on better footing as well.
In the first quarter of 2024, the company reported an operating profit of $614 million, which was a big improvement from the prior-year period where Delta incurred a loss of $277 million. And for the full year, it projects that its operating margin will be between a positive 14% and 15% of revenue.
Year to date, shares of Delta are up 23%. But the stock remains below its pre-pandemic levels when it reached highs of more than $60 – currently it’s at around $50. Trading at a price-to-earnings multiple of just six, it’s a fairly cheap stock for investors right now. And if its performance continues to be strong, the dividend could continue to go higher in future.
