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Is Qantas Airways Limited a buy at this share price?

The Qantas Airways Limited (ASX: QAN) share price currently sits around $5.37 per share, its highest level in more than nine years.

The airline’s share price has bounced from a low of $2.58 around 12 months ago for a number of reasons. The shares are up 79% since June 2016.

Lower oil prices, rising passenger numbers, cost-cutting and improved profitability, stable and rational competition from the likes of Virgin Australia Holdings Ltd (ASX: VAH) and rising airfares have all helped the shares hit record prices recently.

Broker Citi recently reiterated its buy rating on the airline, increasing their price target to a whopping $7.09. Citi believes that the airline’s share price is undergoing a rerating that is long overdue.

It’s not the only airline seeing improved performance though. Regional Express Holdings Ltd (ASX: REX) and Air New Zealand (ASX: AIZ) both have upgraded their guidance for their full year 2017 (FY2017) results.

Qantas expects to report an underlying profit before tax for FY2017 of more than $1.35 billion, which continues the turnaround under CEO Alan Joyce over the past few years.

Foolish takeaway

The results suggest that airlines may have shed their poor reputation for losing shareholders funds, but investors still need to be wary given the external factors that can influence the performance of airlines.

A Big, Fat, Fully Franked Dividend

This company’s dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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