Three Undervalued Value Stocks: Southwest Airlines
Southwest
Airlines stocks are still trading 35% off their prepandemic levels despite the
fact that most restrictions have been globally lifted and the financial
strength of the company has improved significantly. Southwest is the first
among U.S. air carriers who resumed paying dividends at $0.18 per share with
1.8% dividend yield. This is not a large number but it is very impressive considering
that the pandemic is over and that the airlines’
management is convinced about positive future developments.
The airline
traffic for 2022 is expected to be 4.5% above prepandemic levels in 2019. It is
expected to be up by 10% over 2019. These figures indicate Southwest’s ability
to prepare as many aircrafts as needed to meet booming demand and to train
enough pilots and crew members to get them off the ground. While many airlines have
been debating about pilot shortages, Southwest has increased the number of
training programs and has set down a detailed plan about how to hire 1200 pilots in 2022 and 2000 more in
2023.
Southwest
has skipped buying Boeing 737 MAX 7 in favour of the new MAX 8 model.
Considering the current shortage of spares at Boeing this could be a wise move
in the long run that may boost cost effectiveness and earn the company more
money. This would also mean extra rewards for its shareholders and new
investors that will be investing in LUV shares to secure Southwest’s
development.
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