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What are we looking for?

Sustainable dividends from an air industry gaining altitude despite headwinds.

The screen

American Airlines is the latest player to warn that grounding of the Boeing 737 Max is holding back earnings.

The global decision to clip that jet’s wings follows two deadly crashes. Boeing now awaits approval for proposed fixes to the operating system.

While airlines also face higher fuel and labour costs, rising passenger demand – spurred by the U.S. economy – should take the top stocks higher. Their attractive prospects are further highlighted by recent takeover activity – Onex Corp. is set to take WestJet Airlines Ltd. private and Air Canada (which doesn’t pay a dividend) is mounting its own acquisition of Transat A.T. Inc.

Our search started with airlines and related companies offering sound growth prospects but also 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 continual 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 seven stocks primed for growth: SkyWest Inc. and Alaska Air Group Inc. are leading U.S. regional carriers. Hawaiian Holdings Inc. serves not only the Islands but also the broader Pacific region and continental United States. American Airlines Group Inc. and Delta Air Lines Inc. fly to major U.S. and global markets, while low fares and short hauls make Southwestern Airlines Co. another industry giant. Meanwhile, the flight simulators of Montreal-based CAE Inc. are guiding new and seasoned pilots worldwide.

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

Seven air-industry dividend stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. %Recent price $**1Y Ttl. Rtn. % Mkt. Cap. ($ Bil.)**
1CAE Inc.CAE-TAbove Average91.135.8029.49.5
2Delta Air Lines Inc.DAL-NAbove Average82.459.4717.538.6
3Southwest Airlines Co.LUV-NAbove Average81.451.86-2.228.1
4Alaska Air Group Inc.ALK-NAbove Average72.262.940.17.9
5American Airlines GroupAAL-QAbove Average71.232.94-15.814.4
6SkyWest Inc.SKYW-QAbove Average70.861.2912.83.2
7Hawaiian Holdings Inc.HA-QAverage61.827.23-26.11.3

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 decided 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
Southwest Airlines Company
Alaska Air Group
American Airlines Gp
Skywest Inc
Hawaiian Hlds Inc

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