Qantas to look at dividend in August

The airline will consider reintroducing regular dividend payments, for the first time in seven years.

Qantas chief Alan Joyce: ‘All the options are still on the table’. Picture: Renee Nowytarger

The Qantas board will decide in August if it has the capital ­capacity to reintroduce regular dividend payments to shareholders next year for the first time since 2009.

The airline’s chief executive, Alan Joyce, said the board would consider all capital management options following its full-year board meeting.

“The group has reached its optimum capital structure. We’ve got our investment-grade credit rating back. We are generating a lot of free cash,” Mr Joyce said on the sidelines of the International Air Transport Association annual meeting in Dublin this week.

“The board will get together at the end of the full year and look at the appropriate ways of capital management. All the options are still on the table, and the company will look at if it’s optimal to issue a dividend or if it’s optimal to do ­another buyback.”

Qantas is slowing building up cash reserves, having pulled in $1.4 billion in operating cash and $770 million in free cash during the first half of this financial year.

But it has not paid a regular dividend since 2009 and lacks the franking credits to hand over a meaningful dividend. Instead, the airline has preferred to return capital to shareholders in the form of a share buyback.

The airline committed more than $1bn in capital returns to shareholders in the past 12 months, following its 23c-a-share distribution last year and a $500m buyback triggered in ­February. But Mr Joyce indicated this could change as the company continued to whittle away its tax losses of almost $2bn, a hangover from its writedown-heavy $2.8bn loss in 2014.

“The dividend situation relates also to our position on franking credits. We have the ability to issue around a 9c dividend with the franking credits we have. Given the cumulative tax losses, particularly going back a few years, we are rapidly going through them because the company is making good profits,” Mr Joyce said.

“We will be back in a position of paying cash tax with the corporations tax — by the way, we pay a hell of a lot of taxes — and that will allow us the consideration about paying a sustainable franked dividend going forward.

“We continue to be very positive about capital management given the cash position and cash flows of the company, but it’s a board decision that will take place in August.”

Analysts at Citi this week predicted the company would have the cash flows to offer dividends as soon as next year.

“With the benefits of the domestic duopoly yet to be recognised, and the structural changes to international still a few years away, we do believe there can be increased confidence in the delivery of the earnings and free cashflow profile for Qantas,” said Citi analyst Anthony Moulder.

Mitchell Bingemann travelled to Dublin as a guest of Airbus and IATA.