Qantas Airways Limited (ASX: QAN) shares have been a popular option for income investors over the years.
However, the Flying Kangaroo has still not brought back its dividend since suspending it for obvious reasons during COVID-19 pandemic.
Though, that's not to say that there hasn't been any shareholder returns. The company's bumper pre-COVID profits have allowed it to undertake a major share buyback program.
But what about dividends? When are they scheduled to land in income investors' accounts again? Let's find out.
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When will the Qantas dividend return?
The good news is that the team at Goldman Sachs believes that Qantas will be bringing back its dividend in FY 2025.
According to a note out this morning, the broker is forecasting a 30 cents per share dividend this year. Based on the current Qantas share price of $8.03, this will mean an attractive 3.7% dividend yield.
Goldman is then forecasting 30 cents per share dividends in both FY 2026 and FY 2017.
Should you buy Qantas shares?
Although the company's shares have taken off in 2024 and are up 50% year to date, Goldman still sees potential for them to ascend further.
The note reveals that Goldman has responded to last week's market update by reaffirming its buy rating and lifting its price target to $8.90 (from $8.05).
This implies potential upside of 11% for investors over the next 12 months. And if you include dividends, the total potential return stretches to almost 15%.
Commenting on the update, the broker said:
Solid trading update. QAN flagged stable demand for both Qantas and Jetstar, with better Group domestic RASK guidance for 1H25 at +3-5% (prev GSe: +3%) vs +2-4% guided at Aug24 and unchanged Group international RASK guidance of -7-10% (GSe: -8%). We note that the better than expected domestic RASK was on the back of higher load factors and corporate travel improvements (i.e. better mix and PLF rather than purely yield driven unit revenue support) at QAN Dom and stronger than anticipated travel demand at JQ Dom. […] Fuel cost is now guided to be lower than previous due to lower average fuel price assumptions.
In light of this, the broker has lifted its earnings estimates for the near term and its valuation accordingly. It adds:
We raise our FY25/26/27e PBT assumptions by 5%/3%/3% on the back of updated operating trends in Oct24. We reduce our FY25e domestic capacity by ~1% in line with guidance and increased PLF/yield assumptions slightly to reflect the better than expected revenue momentum in FY to date. We also factor in the lower fuel costs (A$2.6b vs prev GSe and guidance A$2.7b) on the back of lower average jet fuel price assumptions.
Attractive valuation
In light of the above, Goldman continues to believe that Qantas shares are attractively priced. It concludes:
Valuation is still attractive in our view. QAN is trading 14% and 5% above pre-COVID market capitalization and enterprise value despite structurally improved earnings capacity (PBT) that is 72% above pre-covid in FY25e with EPS 83% higher. Moreover, we forecast QAN's ND:EBITDA to remain within its target range (as per its dynamic financial framework) across FY25-27e allowing for continued capital returns to shareholders alongside fleet renewal (GSe of A$1.9bn capital return over three years). Retain Buy.
