The group has shrugged off the cost-of-living crisis and looks enticingly cheap
Matthew Partridge Shares editor
Dividends had fallen out of favour until recently. Technology companies tended to look down on them because they saw them as a sign that a company’s growth had peaked, while boards increasingly preferred to return money to shareholders through buybacks. During the pandemic many cash-strapped firms stopped paying dividends altogether, arguing that the need to conserve cash amid the economic uncertainty was more important.
However, they are still an important symbol that a company is doing well enough to generate cash consistently – something particularly important as investors can now get a decent return from a savings account. So, when a company that has stopped paying its dividends starts doing so again, it pays to take note.
One company that recently announced the resumption of its payout was the budget airline easyJet (LSE: EZJ). Like most carriers, it has struggled over the past few years, with the collapse in travel thanks to Covid leading to large losses in 2020 and 2021, followed by a much smaller loss last year. It also had to endure the embarrassment of a potential legal battle with its founder Stelios Haji-Ioannou, who threatened to sue the company after it decided not to cancel completely a large order of planes that it made just before lockdown (the two sides later came to an agreement). After a series of ups and downs, the share price is still down two-thirds from its pre-pandemic level.
A strong summer
The good news is that the future looks much rosier, vindicating the decision to buy more planes. Despite fears that the cost-of-living crisis would prompt customers to cut back on travel, easyJet enjoyed a strong performance this summer, and managed to use its dominant market position to pass on the increased fuel cos
