IAG Dividend: Dates, Forecasts, and Analysis

With demand for air travel rebounding to above pre-pandemic levels, the International Consolidated Airlines (LSE:IAG) share price almost doubled in 2024 and saw the return of its coveted dividend. After four years, shareholder payouts were once again reintroduced on the back of rising earnings and recovering revenue. Here are all the details.

When does IAG pay dividends?

Prior to the pandemic, IAG typically paid dividends twice per year, with the ex-dividend dates set for late June/early July and November. However, since dividends were restored in 2024, the first interim ex-dividend date was set in September, which was misaligned from its historical schedule.

Management teams have full discretion over when dividends are paid as well as how much. But it’s currently unclear whether the firm intends to return to its historical payment schedule or stick to the new one. Regardless, an interim and final dividend payment remains the standard frequency for this business.

What is the dividend payout ratio for IAG

Following its latest interim results in August 2024, IAG announced its interim dividends for the year will be €0.03 per share. The group’s earnings per share over the same six-month period came in at €0.184. Therefore, IAG’s interim payout ratio for 2024 is 16.3%.

Assuming the second dividend payment for 2024 is the same size (which is not guaranteed), that puts IAG’s forward dividend yield at 1.6% compared to the stock’s current share price of 306p.

However, it’s important to note that IAG pays its dividend in Euros, introducing additional foreign exchange rate risk. As such, investors may receive less than expected if exchange rates move unfavourably against British investors.

IAG’s dividend history

IAG first started paying dividends in 2015, which steadily increased until the pandemic came along and disrupted global travel. With management having to prioritise saving capital to keep the lights on, investors’ stream of passive income was disrupted by this enterprise.

What is the IAG dividend forecast for 2024, 2025

With market conditions improving for airline stocks, analysts expect the IAG dividend to rise in the coming years. For the full 2024 fiscal year, current forecasts suggest a dividend per share of €0.081 before rising to €0.12 in 2025.

Assuming these figures prove accurate, investors could have the potential to lock in a 3.3% forward dividend yield. However, it’s important to highlight that forecasts are based on a series of assumptions that may not come to pass. As such, there is no guarantee that IAG will increase shareholder payouts in line with analyst expectations. Even if the firm does, as previously mentioned, unfavourable exchange rates could leave investors with less than expected.

What are the risks of investing in IAG

Airline businesses can be tricky to operate. These businesses have a lot of fixed costs, which opens the door to a lot of operating leverage when times are good. However, this is also a double-edged sword. When market conditions are turbulent, profits can quickly evaporate leaving a lot of bills needing to be paid from cash reserves that may be in short supply.

A common tactic by airline companies is to utilise aircraft lease-back agreements where they sell an aeroplane and immediately rent it back for a pre-determined number of years. This helps raise capital quickly without disrupting operations. However, the ability to use this financial arrangement is dependent on how many planes in IAG’s fleet are 100% owned.

Alternatively, IAG can turn to debt financing to cover any short-term shortfalls in cash flow and earnings. This proved essential during the pandemic. And even today, the group’s net debt position remains fairly substantial at €6.2bn as of September 2024.

However, it’s worth pointing out that this balance has decreased significantly year-on-year by roughly €3bn. In other words, the balance sheet, while leveraged, appears to be getting healthier. And this has been equally reflected by rating agencies like Moody’s raising the group’s credit rating back into Investment Grade territory.

Which airline stock pays the highest dividend?

IAG is not the only airline company listed on the London Stock Exchange that is currently offering dividends. However, assuming it can reach analyst expectations of a €0.081 dividend per share by the end of 2024, IAG shares currently offer the most substantial dividend as of December 2024.