Following a volatile 2018 and concerns over global growth, the Flight Centre Travel Group Ltd (ASX: FLT) share price has had a flat start to 2019.
A meagre half-year earnings report was given a silver lining with the company announcing a special dividend of $1.49 per share. With the Flight Centre share price near its 52-week low, the special dividend gives investors an opportunity to buy Flight Centre shares for income.
Rough half-year report
Earlier this year Flight Centre reported lacklustre half-year earnings. Revenue increased by 7.4% to 1.46 billion, however, net profit dropped 16.9% to $85 million and EBITDA for the half-year fell 5.6% to $167.3 million. As a result, Flight Centre announced that underlying profit for the full year would be at the bottom of its previous guidance range of $380 million to $420 million.
According to Flight Centre higher staff wages, lower margins and a downturn in consumer spending were to blame for a slowdown in the Australian leisure segment. However, a strong performance from the company's corporate travel section was a positive and restored some respectability to half-year earnings.
Special dividend
The franking credit abolition policy announced by Labor last year aims to stop investors (except pensioners) who do not pay income tax, from receiving franking credits. The policy, which would come into effect on July 1 of 2019 if Labour wins the Federal election, provided a window of opportunity for companies with extra cash on their balance sheets.
In what can be interpreted as a silver lining to a disappointing half-year report, Flight Centre declared a 60-cent interim dividend and a $1.49 per share special dividend. The special dividend is 250% more than what was returned to shareholders at the same time last year.
Broker note
Recently broker Morgan Stanley issued a retained overweight rating on Flight Centre with a $51.00 price target. Morgan's cited the strong performance and potential for growth in Flight Centre's corporate travel segment, which would compensate concerns over a slow leisure market.
Foolish takeaway
Flight Centre is a quality business with solid financials, a strong board and a tremendous history of growth. In my opinion, even though there are soft trends in the sector and concerns over global growth, the special dividend at the current share price is a great buy for income.
If the Flight Centre special dividend has you interested, here are our 3 Top Dividend shares for 2019.
