DL747400
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DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 1:07 pm

And the race back to investment-grade status continues..............discuss.


Delta Announces Plan to Return More Than $1 Billion to Shareholders Over Next Three Years

Board of Directors initiates $0.06 per share quarterly dividend, authorizes $500 million share repurchase
Balanced capital deployment creates up to $5 billion of value for shareholders through further debt reduction, return of cash to shareholders, and management of pension liability

SOURCE: http://news.delta.com/index.php?s=43&item=1979

8-K is available here: http://phx.corporate-ir.net/phoenix.zhtml?c=71481&p=irol-sec

[Edited 2013-05-08 06:10:30]
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mcg
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 1:14 pm

Dividend and stock repurchase will delay attainment of investment grade credit rating. This is because the dollars used to pay dividend and fund buyback are no longer available to pay debt obligations.
 
MIflyer12
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 1:25 pm

The full 8-K filing, available from a link in the OP's, offers a reasoned explanation why this is a good path to investment-grade ratings. There's also a sizing of uncommitted CAPEX that might go toward aircraft purchases 2015+.
 
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coronado
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 1:58 pm

Market Capitalization is up to overUS$15.8bn for Delta, compared to $11.2for United Continental and $10.4bn for WN.
US Air (LCC) market cap is at $2.7bn. American does not have a market cap, but have announced that when they merge with LCC and emerge from bankruptcy they hope to have a $11bn market cap.
Not bad for Delta considering that most (many) observers do not regard them as the largest airline.
The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973
 
ordbosewr
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 2:29 pm

Quoting Coronado (Reply 3):
Not bad for Delta considering that most (many) observers do not regard them as the largest airline.

They may not be the largest, but by all accounts they are the healthiest and best run airline in the US. Hands down.
They are clicking on all cylinders. Good for them.
They are the model that all of the large mergers should be. Kudos.....

They are also at least 2 or 3 years ahead of UA and probably 4-5 for US/AA, in terms of merger synergies and operating the network they have optimally. So I think people expect more from them.
 
mcg
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 3:46 pm

Quoting MIflyer12 (Reply 2):
The full 8-K filing, available from a link in the OP's, offers a reasoned explanation why this is a good path to investment-grade ratings. There's also a sizing of uncommitted CAPEX that might go toward aircraft purchases 2015+.

The 8-K vividly illustrates the power of strong earnings and cash flow. It's very good presentation from a very good airline. The fact remains that by returning billions of dollars to shareholders, DAL's credit rating is negatively impacted. This is simply because by moving those dollars to shareholders, they don't remain at DAL as additional 'cushion' to debt holders.
 
EddieDude
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 3:58 pm

The main duty of the board and the management is towards the shareholders. This is a most welcome move for anyone who owns DL shares.

DL has brought down its net debt and the presentation states they are on track to reducing it further this year. When you look at this together with DL's increased income, you see that their debt to EBITDA ratio is decreasing and getting closer to that of companies with investment grades. This bodes well for an upgrade of their rating.
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goosebayguy
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 4:20 pm

Stock repurchases have never worked. Warren Buffet hates them. They are usually a sign of management running out of ideas. Apple seem to have hit the buffers too.
 
commavia
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 4:55 pm

Interesting. Their financial turnaround is surely impressive, and their new, even lower, net debt target is an admirable objective. I find it notable that - given their capital structure and cost of capital - they feel they have run out of projects to plow cash back into that would create shareholder value commensurate with what they can return to shareholders via a dividend and buyback.
 
EddieDude
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 6:49 pm

Quoting goosebayguy (Reply 7):
Warren Buffet hates them.

As recently as March, Buffett said Apple should go ahead with its stock buyback program.
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G500
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 7:03 pm

Quoting EddieDude (Reply 9):
As recently as March, Buffett said Apple should go ahead with its stock buyback program

Yes but Apple has a cash hoard of $137 billion, and increasing rapidly. Apple HAD to do a stock buy back

but I agree with you, they're definetly trying to send the message that they're healthy. This is a good move
 
Flighty
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RE: DL Initiates Dividend, Stock Repurchase And More

Wed May 08, 2013 7:31 pm

Stock buybacks are theoretically ideal. It is a zero tax way to give money to shareholders. Their net worth increases instantly.... According to one method of account.

According to another method, nothing happens to their net worth because they already owned that cash... As shareholders. Apple brought that into sharp focus. Cash is a huge asset and if shareholders own it, QED shareholders are fine .

Problem with buybacks tends to be timing. They occur when businesses are healthy... And stock prices are high. Frequently, in retrospect, share buybacks vaporize perfectly good cash, taking away a shareholder asset, and replacing it with... Bought back shares... Which easily may have declined in value. In which case, you might as well have lit the cash on fire.

If apple dedicated 100b to share buybacks at $500/share, that could easily vaporize 100 billion with nothing at all to show for it in the end. If you had 100 billion dollars, would you stuff all your money into apple at 500? The answer about why not illustrates why buybacks entail significant risk. Risk that the cash was helping to mitigate.

I prefer company hedge funds (more like Buffet's arrangement).
 
cslusarc
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RE: DL Initiates Dividend, Stock Repurchase And More

Thu May 09, 2013 4:14 am

I'd just wish that DL could contin

Quoting Flighty (Reply 11):
It is a zero tax way to give money to shareholders

Not if the shareholder has to pay taxes on their capital gains.

Quoting Flighty (Reply 11):
Frequently, in retrospect, share buybacks vaporize perfectly good cash, taking away a shareholder asset, and replacing it with... Bought back shares...

To me stock buybacks make sense when your stock is near its 52-week low, currently for DL that is $8.42 which is a long way off its current price of $18.66.
--cslusarc from YWG
 
apodino
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RE: DL Initiates Dividend, Stock Repurchase And More

Thu May 09, 2013 6:26 am

Jim Cramer Said today that he is Bullish on airline stocks. I was shocked because Cramer has always said to never buy an airline stock. He was pointing to this as an example of why Airline stocks are the house of pleasure and no longer the house of pain.