Dallas-based Southwest Airlines will give $428 million back to shareholders as it brings back its dividend after more than two years.
The airline said it will start an 18 cents-a-share quarterly dividend for shareholders starting Jan. 31, a sign the company is gaining confidence in a travel rebound.
“Today’s announcement reflects the strong return in demand for air travel and the company’s solid operating and financial results since March 2022,” CEO Bob Jordan said in a statement. “As we bring the year to a close, our fourth quarter 2022 outlook remains strong, and we have a solid plan for 2023.”
It’s the same dividend the airline gave in 2019.
Southwest and other carriers that took government payroll support money were prohibited from paying dividends, buying back shares or raising executive compensation for more than two years, but those restrictions dropped this fall.
The dividend announcement comes after a meeting of Southwest’s board of directors Tuesday and ahead of presentations for its investor day meetings Wednesday.
Southwest has made a $759 million profit through the first three quarters of 2022, including record revenue during the third quarter. The improving financial results are thanks to strong consumer demand and higher airfares, even though the company has a shortage of pilots it blames on a training backlog.
“The reinstatement of our quarterly dividend also reflects our balance sheet strength and continued focus on generating consistently healthy earnings, margins and long-term capital returns,” Jordan said.
Southwest’s leadership has been frank about the fact that restoring the dividend was a high priority after the sunset of government aid restrictions. The airline took more than $5.6 billion in federal grants to help cover payroll costs with the promise that it wouldn’t furlough employees or cut destinations, along with provisions to stop payouts to investors and executives.
“We have a long-standing dividend history, and reinstating a dividend remains a high priority,” Jordan said in October.
While a shareholder dividend was expected, other stock-boosting methods such as buybacks could be a bigger challenge.
Unions across the airline industry and lawmakers have said airlines should forgo stock repurchases and instead invest money back into the business to improve problems with delays and cancellations amid higher disruption rates coming out of the pandemic.
