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What are we looking for?

Sustainable dividends from travel-industry players well prepared to weather coronavirus woes.

The screen

Cancelled airline routes, and now this week’s quarantining of cruise ship passengers off the coasts of Hong Kong and Japan, point to the huge challenges faced by travel stocks as the new coronavirus spreads beyond its hot spot in Wuhan, China.

Meantime, there are some travel and related stocks that should continue to do well during this public-health crisis. And as their shares have dropped along with the industry, in general, they offer investors even better long-term value than before.

Our search started with U.S. dividend payers that have either the global reach to accommodate changing worldwide travel patterns or are instead focused on the domestic – or even regional – market should Americans opt to stay closer to home. From there, we applied our TSI Dividend Sustainability Rating System, awarding points to a stock based on key factors:

  • One point for a long-term (at least five years) record of dividends – two points for more than five years of continuous payments;
  • Two points for raising the payment in the past five years;
  • One point for management’s public commitment to dividends;
  • One point for operating in non-cyclical industries, which are less sensitive to the ups and downs of the economy;
  • One point for limited exposure to foreign currency movements and freedom from political interference;
  • Two points for a strong balance sheet;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point if it’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability rating. 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. Expedia Group Inc.’s websites facilitate travel globally. Alaska Airlines (Alaska Air Group Inc.), Allegiant Air (Allegiant Travel Co.) and SkyWest Airlines (SkyWest Inc.) are major U.S. regional carriers. Southwest Airlines Co. is focused on the United States and nearby destinations. Royal Caribbean Cruises Ltd. and Carnival Corp. cruise the Americas and Europe. Although the former also sails in Asia (and has cancelled cruises out of mainland China and Hong Kong through the end of February), it enjoys considerable strength in its other markets.

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

Select travel-industry dividend stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%)Recent price (US$)
1Royal Caribbean CruisesRCL-NAbove Average82.624.70.1118.26
2Southwest Airlines Co.LUV-NAbove Average81.329.3-1.556.95
3Expedia Group Inc.EXPE-QAbove Average81.216.0-11.9111.10
4Carnival Corp.CCL-NAbove Average74.523.0-25.644.14
5Alaska Air Group Inc.ALK-NAbove Average72.38.12.466.33
6Allegiant Travel Co.ALGT-QAbove Average71.62.826.3171.74
7SkyWest Inc.SKYW-QAbove Average70.82.913.559.72

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. 

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

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