Qantas Airways Limited (ASX: QAN) shares are not often mentioned for their dividend but they tick a lot of the boxes for what to look for in a good dividend share. Here’s what you need to know.
About Qantas
Qantas is Australia’s leading airline. It was founded in the Queensland outback in 1920, the Qantas name was originally Queensland and Northern Territory Aerial Services. The company operates two main airlines – Qantas and Jetstar – and subsidiary businesses including other airlines, and businesses in specialist markets such as Q Catering, Qantas Freight Enterprises and the popular Qantas Frequent Flyer program. It employs some 30,000 people with around 93 per cent of them based within Australia.
Dividend Share Qualities
When I look for dividend shares, I look for companies with long-term track records of positive performance, some kind of competitive advantage, and the ability to consistently increase dividends.
Qantas certainly ticks the first two boxes. Year-to-date, Qantas shares are up 16.15% and over a ten-year timeframe, shares are up 121%. Qantas is by far Australia’s largest airline and it maintains a very high reputation. While there are cheaper domestic travel options, travellers will often pay more for a Qantas flight for the quality. That’s a powerful competitive advantage to have.
In terms of the dividend track-record, Qantas paid regular dividends in the early 2000s before stopping in 2009. However, the company began paying dividends once again in 2016 and dividends have more than tripled since.
The current trailing dividend yield is 3.85% per year, fully-franked. The video below explains franking credits in more details but essentially, if you’re able to make use of these credits then your gross yield would increase to around 5.5%.
Is Qantas A Buy?
These recent dividends are looking tempting but the stoppage from 2009 to 2016 should serve as a reminder that dividends are far from being guaranteed. However, with a high yield, a growing share price and growing dividends, Qantas might be worth a closer look.
If you take the current price-to-earnings (P/E) ratio and compare it to other similar industrials like Sydney Airport Limited (ASX: SYD), Qantas shares also begin to look quite cheap.
If you like the look of Qantas shares, you might also be interested in the three dividend-paying companies in the free report below.
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Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.