Delta Air Lines Inc.
), the largest airline company in the U.S., is set to restart its
quarterly dividend and has authorised a share repurchase program,
over a period of three years. The move is believed to be an
attempt by Delta to win back investors' confidence, who have
suffered due to the slump in the airline industry.
The airline giant has authorised a share repurchase program of
$500 million and will pay a quarterly dividend of 6 cents per
share on Sep 10 to the shareholders of record on Aug 9. Delta
last paid a dividend in 2003. Together, the dividend and stock
buyback program will return $1 billion to the shareholders of
Delta. The news showed a favourable impact on the market, which
lifted the stock price by 3.21% in the Wednesday trade in NASDAQ
to arrive at $18.66.
Delta has sufficient cash to carry out this program. The
company exited the first quarter of fiscal 2013 with $3.64
billion in cash and short-term investments and $457 million in
free cash flow.
), which pays a quarterly dividend of a penny, Delta will be
second among the big airline companies in the U.S. to pay a
dividend. Beside these two company's other major airlines like
United Continental Holdings Inc.
JetBlue Airways Corporation.
), do not pay dividends.
Delta has made several investments to improve operating
efficiencies and customer experience, which aided the company to
re-initiate shareholders' return. Further, the Atlanta-based
company has also considerably reduced its debt in the last 5
years, which reflects its balance sheet strength.
Recently, Delta reported better-than-expected first-quarter
2013 financial results, where the bottomline beat the Zacks
Consensus Estimate by 3 cents. Strategic expansion measures,
operational efficiency and better products and services aided the
company to deliver an impressive performance.
We believe that these initiatives coupled with the share
repurchase/dividend plan will allow Delta to capture back
investors' confidence. Share repurchase will boost the earnings,
while regular dividend is expected to push the stock prices
higher. However, a high debt of around $12.31 billion at the end
of the first quarter of 2013 remains a major headwind for
Currently, Delta carries a Zacks Rank #3 (Hold).
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
To read this article on Zacks.com click here.