Barclays Reviews Southwest Dividend Boost, Buyback

In a report published Thursday, Barclays analysts maintained an Overweight rating on

, while reducing the price target from $51 to $50. Southwest Airlines announced a 25 percent hike in its dividend, while authorizing a share repurchase initiative worth $1.5bn. "Both the buyback and dividend hike further highlight the industry improvement and benefits of low oil prices," the analysts said. The company's fleet, network and integration efforts are now generating operating margins that are similar to those generated by

and

. "LUV continues to run capex/revenue at the 9-9.5% level, at the high end of the ‘big 4' US airlines and the only large airline with growth capex….Our hesitation on today's announcement is the elevated capex/revenue rate at LUV despite still posting averageish margins, and incrementally the move to upgrade the '16 -700 orders to -800s without lowering the planned fleet count by year-end 2016," the analysts added. The EPS estimate for 2016 has been reduced from $3.25 to $3.15. Although Southwest Airlines has "sizable free-cash flow," the analysts believe that the more "capital disciplined legacies" offer "better upside potential."