Southwest Airlines (Dallas) announced its Board of Directors, at its meeting held today (May 14), increased the Company’s quarterly dividend by 50 percent and authorized a new $1 billion share repurchase program. Under the new $1 billion share repurchase authorization, an initial $200 million of Southwest common stock will be repurchased under an accelerated share repurchase program. The quarterly dividend will increase to $.06 per share from $.04 per share, beginning with the 151st consecutive quarterly dividend declared today to Shareholders of record at the close of business on June 4, 2014 on all shares then issued and outstanding. The dividend will be paid on June 25, 2014. Annualized, this increased dividend amounts to over $160 million based on approximately 692 million1 shares of common stock outstanding.
Gary C. Kelly, Chairman of the Board, President, and CEO, stated: “The actions taken today by our Board are in recognition of our strong financial position and performance, strong cash flow outlook, and dedication to returning value to our Shareholders. The Board authorized an increase in our quarterly dividend payment to $.06 per share from $.04 per share. Based on yesterday’s closing stock price of $24.98, this would provide an approximate one percent annual dividend yield to our Shareholders. The Board also authorized a new $1 billion share repurchase program. Last week, we completed our previous total $1.5 billion share repurchase authorization, bringing the cumulative return to Shareholders through share repurchases and dividends, since August 2011, to approximately $1.7 billion.
“Today’s announcement enables us to further Southwest’s long-standing commitment to deploy capital back to our Shareholders, while preserving our financial strength. We have maintained an investment-grade credit rating for over 30 years, the only U.S. airline with such a distinction. Our balance sheet and liquidity remain strong with cash and short-term investments of approximately $3.7 billion1, and a fully available unsecured revolving credit line of $1 billion. As of April 30, 2014, we have reduced our debt and capital lease obligations, net, by approximately $1.5 billion since the acquisition of AirTran, and intend to repay an additional $470 million in debt and capital lease obligations for the remainder of this year.
“With the upcoming repeal of the Wright Amendment, launch of international service, launch of service from the additional slots acquired at New York’s LaGuardia Airport and Reagan Washington National Airport, and the planned completion of the AirTran integration, 2014 is a monumental year for Southwest and our Shareholders. We are very pleased with the successful execution of our major strategic initiatives thus far, which have contributed significantly to our profits. The momentum from our record first quarter 2014 results continued into April, with strong traffic and revenue trends. Based on these trends and our current outlook, we are on track with our plan to achieve a 15 percent pre-tax return on invested capital, excluding special items, this year.”
As of May 9, 2014, the Company completed its previous total $1.5 billion share repurchase authorization, including $200 million, or approximately 8.6 million shares, under an accelerated share repurchase program launched in February 2014. Under the total $1.5 billion share repurchase authorization, the Company repurchased approximately 126 million shares, which has reduced its shares outstanding by over 15 percent since August 2011. The Company intends to execute an agreement today to implement a new $200 million accelerated share repurchase program. The remaining $800 million of authorized share repurchases under the new program will be made in accordance with applicable securities laws in open market, private, or accelerated repurchase transactions from time to time, depending on market conditions, but may be discontinued at any time.
Copyright Photo: Bruce Drum/AirlinersGallery.com. Boeing 737-8H4 N8305E (msn 36683) taxies to the runway at Seattle-Tacoma International Airport. On April 9, 2014 operated its first revenue flight utilizing a Boeing 737-800 equipped with Aviation Partner’s Boeing Split Scimitar Winglets. The newly designed winglet differs than those currently installed on the carrier’s fleet of Boeing 737s, with aerodynamic scimitar tips and a large ventral strake on the bottom of the blended winglet structure. By upgrading the 737-800s with Split Scimitar Winglets, annual fuel savings are estimated to increase from approximately 3.5 percent per aircraft from Blended Winglets to approximately 5 to 5.5 percent per aircraft annually. In addition, the new winglet will reduce emissions, supporting Southwest’s commitment to the environment. The Split Scimitar Winglets will be installed on 33 new 737-800s once they are delivered to the airline this year. The airline also plans to retrofit 52 additional 737-800s currently in the fleet. The retrofits are expected to be completed by early 2015. All of the carrier’s Boeing 737-700s and 737-800s, as well as a majority of its 737-300s, are equipped with Blended Winglets saving the company roughly 55 million gallons of fuel annually. Blended Winglets were first installed on Southwest Airlines Boeing 737s in 2007.