Investors Applaud Southwest Airlines' Move To Returns Value To Shareholders

Investors have cheered and applauded Southwest Airlines Co.

for announcing increased dividend apart from authorizing a fresh share buyback program as part of its returning value to its shareholders. Their reaction in the market was quite evident when the stock traded two percent higher on Wednesday following the news. Southwest Airlines said that its Board boosted its quarterly dividend by 33 percent. As a result, the quarterly dividend would increase to $0.10 a share from $0.075 a share. It would be their 159th straight quarterly dividend. The company also fixed the record date of June 29 to determine the eligible shareholders. The airline firm said that the dividend would be paid on June 29, 2016. This increased dividend amounts to approximately $255 million on an annualized basis based on approximately 632 million shares of common stock outstanding. Aside from the dividend, Southwest Airlines also said that its board has authorized a fresh $2 billion share repurchase program. The company said that as per the new $2 billion share repurchase authorization, it plans to buy back an initial $500 million of its stock under an accelerated share buyback program. Commenting on the initiatives, the company's chairman and CEO, Gary Kelly, said, "I'm pleased to announce the Board's decision today to increase our quarterly dividend by 33 percent, which would provide an approximate one percent annual dividend yield to our Shareholders, based on yesterday's closing stock price of $42.20. On a cumulative basis over the past five years, including today's increase, our quarterly dividend has grown more than twenty fold." He continued to say that "The Board also authorized a $2 billion share repurchase program, representing our largest repurchase authorization in a decades-long history of returning value back to our Shareholders through share repurchases. Since 2010, we have reduced our outstanding shares by over 25 percent through the cumulative repurchase of $4 billion of common stock. Our strong performance, investment grade balance sheet, and cash flow outlook has enabled the Board's actions today that reinforce our ongoing commitment to return value to our Shareholders." The airline company recently completed its previous total $1.5 billion share repurchase authorization. That included $700 million repurchased this year under accelerated share repurchase programs. The stock traded 2.13 percent higher on Wednesday.