Delta increases dividend, stock buyback

Atlanta-based Delta said Tuesday it will boost the quarterly dividend from 6 cents to 9 cents a share. Its board also authorized a new $2 billion stock buyback program through 2016, the airline said.

Delta said the two moves combined will return $2.75 billion to shareholders.

The announcement was well received on Wall Street. “Many airlines have attempted to mimic Delta’s blue print. At this point, we believe Delta is several years ahead of both United and American,” Cowen and Co. analyst Helane Becker wrote in a note to investors Tuesday.

Delta had a record $2.7 billion profit in 2013, excluding a one-time accounting gain related to taxes and other items.

It has been paying dividends and buying back stock to reward shareholders since last year, when it announced its first dividend in a decade, along with plans to buy back $500 million of shares. The company says it is now on track to return $700 million to shareholders by next month.

It’s part of an effort to remake Delta into a company whose stock is seen as a good investment, leaving behind its image in the past decade as a financially-struggling airline. As part of that effort, Delta has avoided growing its flight schedule too much or buying too many new planes, while putting a priority on boosting revenue from existing operations — which often translates into higher fares.

Meanwhile, Delta executives have been working to draw down the company’s net debt from $17 billion at the end of 2009 to about $9 billion today, with a target of $5 billion by the end of 2016.

The company is also contributing nearly $1 billion annually to its pension plans — about $250 million above the minimum funding required — to lower its pension liability. Delta said it will continue with that pension funding contribution level through 2020 to have pensions 80 percent funded by then.