With one of the world’s most influential investors, Warren Buffett, recently diving back into the U.S. airline industry (and in a big way, too), investors are now considering whether or not airlines should fit into a portfolio as a short-term or long-term position. After all, even the Oracle of Omaha himself has spoken at length about the long-term risks associated with the airline industry, once cliaming that he would never buy stock in another airline again.
As it happens, things have come full circle, and Canadian airlines have piqued the interest of many domestic investors due to their relatively cheap valuations and their far-more-insulated market positions relative to their American counterparts. In Canada, there are really only two companies to choose from: WestJet Airlines Ltd. (TSX:WJA) and Air Canada (TSX:AC), with each carrier offering slightly different offerings, with different selling points for different investors.
Those investors who are not 100% comfortable in purchasing equity in a Canadian airline without some sort of dividend would be forced to choose WestJet. The company’s 2.2% dividend, while modest, is likely to continue to increase over time; after initiating a dividend in 2010, the company has maintained or increased its dividend each year, providing investors with some sort of security that the dividend is likely to be maintianed over time.
While the airline industry is a highly cyclical one, an investor considering the Canadian airline industry with hopes of cashing in on the signficant capital apprecition of late, but looking for the safety of a dividend, should take a deeper look at WestJet.
Invest wisely, my friends.
