Wednesday, February 1, 2023
HomeMarketSouthwest Restores Dividend After Pandemic Pause

Southwest Restores Dividend After Pandemic Pause

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Southwest Airlines will reinstate its quarterly dividend in January, the first major airline to resume the payouts since the pandemic in another sign the industry is confident about continued travel recovery. 

Major carriers suspended their dividends and share buybacks during the Covid-19 pandemic as a condition of receiving the federal government’s $54 billion in aid to the industry. The restriction on dividends ended this fall.

The industry is again becoming profitable as leisure travelers resume flying in high numbers, even though airfares are higher than they were before the pandemic. Business and international travelers are expected to rise in 2023. 

Southwest (ticker: LUV) CEO Bob Jordan said the return of the dividend “reflects the strong return in demand for air travel and the Company’s solid operating and financial results since March 2022,” adding that “our fourth quarter 2022 outlook remains strong, and we have a solid plan for 2023.” 

Southwest said ahead of Wednesday’s investor day that it expects fourth quarter revenue to top fourth quarter 2019 levels by 13% to 17%, noting that fuel prices had eased and that it aims to increase its flying capacity by about 15% in 2023, The Wall Street Journal reported.

Southwest will make quarterly cash payments of 18 cents a share, the same amount it paid out before the pandemic, on Jan. 31, 2023, to shareholders of record as of Jan. 10. 

The dividend will cost Southwest a total of $428 million a year, based on the 594 million shares of common stock outstanding on Monday, Dec. 5. The amount represents a 1.8% dividend yield, based on Southwest’s closing price of $39.50 that day.

Other than the suspension during the pandemic, Southwest said this dividend would be its 175th quarterly dividend over more than 40 years. 

But although shareholders will likely welcome the news, Southwest’s pilots union, which represents more than 9,800 pilots, was less enthusiastic amid its continuing contract negotiations with the carrier.

“We are obviously disappointed that
Southwest Airlines
has, once again, chosen to forgo its legacy of treating its employees well so that shareholders would ultimately be rewarded,” said Captain Casey Murray, president of the Southwest Airlines Pilots Association, in an emailed statement to Barron’s.

“With more than two-thirds of its labor contracts still open, including our pilots’, and after threatening to furlough less than two years ago, reinstating dividends just illustrates how far Southwest has veered from its path,” he said, adding that the union is picketing on Wall Street today to “show our displeasure with this announcement.”

Southwest’s shares fell 4.7% on Wednesday afternoon and are down nearly 11.8% so far this year. The S&P 500 is down 17.5%.

Write to Janet H. Cho at janet.cho@dowjones.com

Credit: marketwatch.com

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