A WestJet plane takes off from the international airport in Calgary, Thursday February 13, 2003. THE CANADIAN PRESS/Adrian Wyld
February 06, 2013 - 7:03 AM
WestJet Airlines is boosting its quarterly dividend 25 per cent after beating expectations by reporting a record-breaking year in 2012, including a huge increase in fourth-quarter profits.
The company also said Wednesday that it was renewing its share buyback program and will raise its quarterly dividend to 10 cents from eight cents, payable March 28 to shareholders of record March 13.
Based on WestJet's closing share price of $22.55 on the Toronto Stock Exchange on Tuesday, the new dividend would raise the annual yield to 1.77 per cent.
In early trading Wednesday, the issue gained 15 cents to $22.70.
The Calgary-based airline (TSX:WJA) said net earnings were $60.9 million or 46 cents per diluted share in Q4 on revenue of $860.6 million.
That was up more than 70 per cent from net earnings of $35.6 million or 26 cents per share on revenue of $781.5 million in the comparable period of 2011.
WestJet's full-year profit soared 63 per cent to $242.4 million or $1.78 per share on revenue of almost $3.43 billion.
"We are very pleased with the positive momentum generated in 2012 that culminated with us reporting record annual earnings, record high load factors and, for the second consecutive quarter, we surpassed our return on invested capital target of 12 per cent by achieving 13.7 per cent for the year," WestJet president and CEO Gregg Saretsky said in the earnings announcement.
WestJet was expected to earn 41 cents per share on $856 million of revenues in the quarter, and $1.72 per share on $3.42 billion of revenues for the year, according to analysts polled by Thomson Reuters.
The airline flew 17.4 million passengers last year, up 8.6 per cent from 2011, including 4.3 million in the fourth quarter.
Saretsky said the decisions to repurchase up to five per cent of WestJet's outstanding shares and raise its dividend signals its confidence in the business and commitment to return value to shareholders.
WestJet expanded its international network last year by implementing 13 new interline partnerships and augmenting four (Delta Air Lines, Korean Air, China Eastern Airlines and British Airways) into code-share relationships.
The airline expects moderate revenue per seat mile growth in the first quarter on top of a six per cent increase last year while costs, excluding fuel and employee profit sharing, should increase two to three per cent.
It ended the year with $1.4 billion in cash or 41 per cent of trailing twelve month revenue.
Analysts described WestJet's results as positive and further demonstrate the likelihood of strong results to come in 2013.
"Outlook is strong and we believe that 2013 will be another record year for WestJet earnings," wrote Jacques Kavafian of Toll Cross Securities.
He said demand for travel is strong and capacity growth is moderate which means earnings should continue to benefit from balanced supply and demand.
Walter Spracklin of RBC Capital Markets said the addition of premium economy seating and tiered pricing should boost profitability above WestJet's near-term target of a sustainable 12 per cent return on invested capital.
"Both the dividend increase and (share buyback) are good indications that management is confident in their ability to generate strong free cash flow growth and should benefit from positive investor sentiment.
News from © The Canadian Press, 2013