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What are we looking for?

Sustainable dividends from air-industry stocks set to soar.

The screen

Air Canada’s less-than-friendly bid for Aimia’s Aeroplan business boosted airline-related stocks. Indeed, the carrier’s shares jumped on the news that it and a group of investors hoped to snatch up the loyalty program for $250-million.

While Aimia has so far rejected all offers, the outlook for Air Canada and other carriers is bright. Still, industry stocks have risks – rising fuel prices and expanding seat capacity that threatens to cut down ticket prices. Countering that drag effect is global economic growth and a burgeoning middle class.

The best of air-industry stocks offer sustainable dividends (although Air Canada doesn’t pay a dividend).

Our search started with industry stocks offering sound growth prospects. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – 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 sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

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. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated nine stocks. Delta and American Airlines serve all major U.S. and global markets. Alaska Air and SkyWest are major U.S. regional carriers. Hawaiian Holdings serves the islands – plus the mainland and Pacific Rim. Specializing in low fares and short hauls, Southwestern is one of the largest U.S. carriers. Big Canadian discounter WestJet has an expanding no-frills and overseas network. Boeing dominates aircraft manufacturing, while CAE’s flight simulators are training a new generation of pilots.

We advise investors to do additional research on investments we identify here.

Airline stocks with sustainable dividends

Ranking Company Ticker Dividend Sustainability Rating Div. Yield (%) Points Market cap ($Bil) Share price ($) 1-Yr Total Return (%)
1 CAE Inc. CAE-T Above Average 1.3 9 7.2 27.31 25.9
2 WestJet Airlines WJA-T Above Average 3.2 8 2.0 17.30 -33.0
3 Delta Air Lines DAL-N Above Average 2.5 8 37.6 55.23 9.8
4 Boeing Co. BA-N Above Average 2.0 8 199.1 347.78 45.2
5 Southwest Airlines LUV-N Above Average 1.1 8 33.1 58.82 7.3
6 Alaska Air Group ALK-N Above Average 2.0 7 7.8 64.15 -24.7
7 American Airlines AAL-Q Above Average 1.0 7 17.7 38.38 -23.2
8 SkyWest Inc. SKYW-Q Above Average 0.7 7 3.1 60.65 67.1
9 Hawaiian Holdings HA-Q Average 1.2 6 2.1 41.30 -2.8

Source: Dividend Advisor

Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. Share price and market cap are in native currency.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/05/24 4:00pm EDT.

SymbolName% changeLast
Cae Inc
Delta Air Lines Inc
Boeing Company
Southwest Airlines Company
Alaska Air Group
American Airlines Gp
Skywest Inc
Hawaiian Hlds Inc

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