Who doesn’t love an enjoyable experience when flying? I know I do. However, enjoying a flight is a rarity these days, especially when top airliners are making their own “headliners” from ripping people off planes, arresting them or the customer service is of the worst quality. Personally, when I think of the most enjoyable experience that I’ve had from terminal, to boarding, to getting off the plane, I can only think of one airline. That airline is Delta and I happened to purchase their stock last week.
The Stock – Delta Airlines (DAL)
Delta (DAL) is the second largest airline company by revenue and is the largest by market capitalization. In fact, I performed a robust dividend stock analysis on Delta two and a half months ago. Let’s just say, I was intrigued then. For those that don’t know Delta, here is one brief sentence from Google Finance, “Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo throughout the United States and across the world.” I believe hat sums it up quite nicely. To rewind back to that analysis I performed, they were trading at $50.80 per share with a dividend, at the time, of $0.81 per share, per year. Well, guess what happened? Delta announced a 50% increase to their dividend and a MASSIVE $5 billion repurchase program. I was LOVING this news. At the time of my purchase on August 15th, the share price was $50 per share, or almost a 2% drop since that article, with the large increase in their dividend yield as well. I knew that the timing was “right” for me to hop in the seat on this airline. As I typically do, let’s run through the dividend diplomat stock screener stats for this one.
1.) Price to Earnings (P/E) – At the time of purchase, for ease of rounding, the price was $50.00 per share. Forward earnings are looking like $5.04 per share. Therefore, this equates to a p/e ratio of a measly 9.92 and is far below their competitors and the S&P 500 as a whole. I typically want to see below 18 and 10 is usually a low point for me, as there may be something interesting going on that an ordinary investor doesn’t know about. This is right around the 10 mark, and given how popular and well-known Delta is, I feel a heck of a lot better.
2.) Dividend Yield – To rewind briefly, in the Delta stock analysis article from two months ago, their yield was only 1.59%. The 50% dividend increase and a small drop in the share price of almost 2%, has allowed the dividend yield to spring up to a more tasteful 2.43% (new Dividend amount is $1.22 per share). With that dividend growth mindset to expand their yield and their current earnings, I’m excited for this company to play well in my portfolio.
3.) Dividend Growth Rate – Listen everyone, Delta (DAL) has had FOUR years of CONSECUTIVE 50% increases to their dividend! In fact, this was the year where it was 50.6%, instead of 50% spot on. I love this history and the track record they are laying down. Find out why the dividend growth rate is extremely powerful. This far surpasses my current growth rate by almost 10 fold, yikes!
4.) Payout Ratio: Since forward earnings is $5.04 and their current dividend is $1.22, the payout ratio is very nice here. At a calculated 24%, the payout ratio is low and the growth rate mentioned above can still continue for quite some time. Think about this, if earnings stayed stagnant at $5.04 and the dividend went up another 50%, from $1.22 to $1.83, the payout ratio is STILL ONLY 36%. I love it.
To show proof of my “ticket” on this airline:
I purchased $1,500 worth at $49.9965 per share for a total of 29.9231 shares, with a $3.95 trading fee. This added $36.51 to my forward dividend income. Based on the last few years of flying, I always have had the best experiences with Delta Airlines. Honestly, I feel great to be a shareholder and now will always try to make an effort to fly with them for work and personal travels.
Delta Airlines (DAL) Stock Purchase Summary & Conclusion
This is another NEW addition to my portfolio, and is actually a new industry (Consumer-Airline) that I currently do not have. This marks the 10th purchase this year is pushing me towards the dividend goal within my goals set for 2017. I am very excited for Delta, as well as their share repurchase program. The repurchase program should open up quite a bit of value from a dividend investor stand point, as it may allow room for earnings growth and dividend increases. On top of that, their customer satisfaction is by far the best I’ve seen in the industry, with Southwest a solid second. My order of operations is always Delta, Southwest and then United. I wish there were more flights from Delta out of Cleveland, that’s for sure.
Now onto the readers, what do you think of this dividend stock purchase? Do you like it? Are you staying away from flying and therefore, are staying away from buying an airline stock? Think this industry is too hard to determine where they are going? Would you buy them, right now, with the dividend metrics displayed above? Would love to hear your feedback, as always. I appreciate the feedback and insight you have on this investment decision! Thank you again, everyone, good luck and happy investing!
-Lanny