Southwest Airlines increased quarterly dividend

Dino D'Amore
By Dino D'Amore May 15, 2014 14:02

Southwest Airlines increased quarterly dividend

At its annual shareholder meeting, Southwest Airlines increased its quarterly dividend by 50% to 6 cents a share and also authorized a new share repurchase program of $1 billion.

Under the new $1 billion share repurchase authorization, an initial $200 million of Southwest common stock will be repurchased under an accelerated share repurchase program.  The quarterly dividend will increase to $.06 per share from $.04 per share, beginning with the 151st consecutive quarterly dividend declared today to Shareholders of record at the close of business on June 4, 2014 on all shares then issued and outstanding.  The dividend will be paid on June 25, 2014.  Annualized, this increased dividend amounts to over $160 million based on approximately 692 million1 shares of common stock outstanding.

Gary C. Kelly, Chairman of the Board, President, and CEO, stated: “The actions taken by our Board are in recognition of our strong financial position and performance, strong cash flow outlook, and dedication to returning value to our Shareholders. The Board authorized an increase in our quarterly dividend payment to $.06 per share from $.04 per share.  Based on yesterday’s closing stock price of $24.98, this would provide an approximate one percent annual dividend yield to our Shareholders.  The Board also authorized a new $1 billion share repurchase program.  Last week, we completed our previous total $1.5 billion share repurchase authorization, bringing the cumulative return to Shareholders through share repurchases and dividends, since August 2011, to approximately $1.7 billion.

“Today’s announcement enables us to further Southwest’s long-standing commitment to deploy capital back to our Shareholders, while preserving our financial strength.  We have maintained an investment-grade credit rating for over 30 years, the only U.S. airline with such a distinction.  Our balance sheet and liquidity remain strong with cash and short-term investments of approximately $3.7 billion, and a fully available unsecured revolving credit line of $1 billion.  As of April 30, 2014, we have reduced our debt and capital lease obligations, net, by approximately $1.5 billion since the acquisition of AirTran, and intend to repay an additional $470 million in debt and capital lease obligations for the remainder of this year.

“With the upcoming repeal of the Wright Amendment, launch of international service, launch of service from the additional slots acquired at New York’s LaGuardia Airport and Reagan Washington National Airport, and the planned completion of the AirTran integration, 2014 is a monumental year for Southwest and our Shareholders.  We are very pleased with the successful execution of our major strategic initiatives thus far, which have contributed significantly to our profits.  The momentum from our record first quarter 2014 results continued into April, with strong traffic and revenue trends.  Based on these trends and our current outlook, we are on track with our plan to achieve a 15 percent pre-tax return on invested capital, excluding special items, this year.”

As of May 9, 2014, the Company completed its previous total $1.5 billion share repurchase authorization, including $200 million, or approximately 8.6 million shares, under an accelerated share repurchase program launched in February 2014.  Under the total $1.5 billion share repurchase authorization, the Company repurchased approximately 126 million shares, which has reduced its shares outstanding by over 15 percent since August 2011.  The Company intends to execute an agreement today to implement a new $200 million accelerated share repurchase program.  The remaining $800 million of authorized share repurchases under the new program will be made in accordance with applicable securities laws in open market, private, or accelerated repurchase transactions from time to time, depending on market conditions, but may be discontinued at any time.

Dino D'Amore
By Dino D'Amore May 15, 2014 14:02
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