During the roughly 16 months in which the pandemic shut the cruise industry at U.S. ports, every cruise line was bleeding money.
Royal Caribbean, and its peers, had to borrow money at very high interest rates. And while the cruise line tightened its belt as much as possible, expenses still had be paid. Ships can't just be parked; when they are docked, that still comes with fees.
Royal Caribbean and all the rest had to keep crews on ships to maintain them. The ships needed fuel and their crews needed to eat. Rent on land-based buildings was still due, and private islands had to be maintained.
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Money was going out, and only a trickle was coming in. Some people were still putting deposits on future cruises, but as those dates got canceled, that money had to be refunded.
Even when the industry was allowed to return, ships sailed at well below capacity, due partly to social distancing and partly because Americans were reluctant to sail.
For the first six months, maybe even the first year, the cruise industry seemed as if it might not recover.
Vaccines and time eventually changed things, and people remembered how much fun taking a cruise was. For Royal Caribbean, that led to a massive comeback and return to profitability.
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Image source: Royal Caribbean
Royal Caribbean has climbed out of the abyss
Earlier this year, Royal Caribbean brought back its dividend, something that seemed unthinkable just a few quarters before.
Companies pay dividends to return cash to shareholders. They do that only when they also have all the cash they need to meet their obligations and fuel growth.
To reach the point of being able to return money to investors, Royal Caribbean had to pay down and rework debt and return to being comfortably profitable.
For the third quarter, Royal Caribbean continued to post stellar results.
The company reported Q3 net income was $1.1 billion, or $4.21 a share, compared with $1 billion, or $3.65, in the year-earlier period. The increase on the per-share number was 15%. Adjusted profit, which excludes special items, was $5.20 a share, up 35% from $3.85 a year earlier.
The cruise line sailed at 111% of capacity and widened its profit margins by 13.4%.
“We wake up every day obsessively focused on our mission of delivering a lifetime of the very best vacation experiences to our guests," Royal Caribbean Chief Executive Jason Liberty said in a statement.
Royal Caribbean brought back its dividend and then boosted it
As part of its second-quarter earnings call in July, Royal Caribbean showed it was all the way back from the dark days of Covid. The board declared a dividend of 40 cents a share, which it paid on Oct. 11 to shareholders of record Sept. 20.
That was an understated way to deliver news that once seemed impossible. Royal Caribbean had been pushed to the edge by a crisis nobody could have imagined, and the company somehow not only survived but thrived beyond its pre-Covid success.
Had Liberty shouted the news like a pro wrestler celebrating winning a world championship while yelling, "Let's f****** go!" it would not have been taken as an overreaction.
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Now, the cruise line has built on that success.
On Dec. 11 the board declared a quarterly dividend of 55 cents a share, an increase of 38% from the previous payout. The latest dividend is payable Jan. 13 to shareholders of record Dec. 27.
"This increase reflects the company's continuing efforts to enhance shareholder returns," RCL said in a terse press release.
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