What are we looking for?
Sustainable dividends from an airline industry ready for an Olympics travel surge – and the more-general spike in summer demand.
The screen
Air France-KLM is ramping up its service to Paris as the world gets ready to converge on the French capital for the Olympics. And it’s not alone. Our analyst team at TSI Network also expects several North American carriers – with or without direct flights to France – to fly high on summer travel demand.
In fact, the International Air Transport Association is predicting record revenue of US$996-billion for the airline industry this year. That’s up 9.7 per cent from 2023′s strong performance.
While leisure travel to Paris and elsewhere is fuelling much of that climb, business travel demand has improved steadily this year – just over a year since the WHO declared the pandemic was no longer a global health emergency.
The top dividend-paying airlines are especially well placed to share their gains with investors.
Our search started with airlines offering solid revenue growth and dividends. We then applied our TSI Dividend Sustainability Rating System, which awards points to a stock based on key factors:
- One point for five years of continuous dividend payments, and two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company is an industry leader.
Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks: Delta Air Lines Inc., DAL-N headquartered in Atlanta, flies to major U.S. and global markets, while its low fares and focus on short hauls make Dallas-based Southwestern Airlines Co. LUV-N another industry giant. Allegiant Travel Co., ALGT-Q headquartered in Las Vegas, operates a low-cost passenger airline, linking travellers in small cities to vacation destinations such as Las Vegas, Phoenix and Orlando. Singapore Airlines Ltd. SINGY is that city-state’s national carrier, and it also operates discount airline Scoot. Panama-based Copa Holdings SA CPA-N is a Latin American provider of passenger and cargo services. The company offers service to countries in North, Central and South America, and the Caribbean. And finally, Germany’s flag-carrier Deutsche Lufthansa AG DLAKY flies globally under its own brand, but also owns Swiss International Airlines, Austrian Airlines, Discover Airlines, Brussels Airlines and Eurowings.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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