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Why the Qantas share price is at a new 52-week high

The Qantas Airways Limited (ASX: QAN) share price has rallied this morning and hit a new 52-week high after rising more than 3.8%. QAN shares opened at $6.61 and climbed to print the new high of $6.77 just after 11am this morning, before dipping back slightly to be sitting at $6.72 at the time of writing. If Qantas can break the $6.81 mark it set in July 2018, QAN shares will be at a new all-time high.

Qantas shares have had a rocky 2019 so far, but are still up 17% for the year (not including dividends). The shares were under pressure in the immediate aftermath of the September Saudi Arabian oil strikes, but have since recovered those losses to make today’s new high.

Why are Qantas shares at this new high?

Investors have been bullish on Qantas in general after the company’s turnaround strategy (commenced in 2011) has resulted in record profitability for the airline, and a robust dividend that on today’s pricing indicates a starting yield of 3.7%.

However, QAN shares seem to have gotten a major boost following an ASX announcement from the company late yesterday afternoon. In this release, Qantas announced that it is again in the position to qualify for inclusion in the MSCI Global Investable Market Indexes.

The MSCI index is tracked by some of the largest exchange traded funds (ETFs) in the world, including those from ETF giants Vanguard and BlackRock. ETFs like the Vanguard MSCI Index International Shares ETF (ASX: VGS) and the iShares Core MSCI World All Cap ETF (ASX: IWLD), which have tens of billions of dollars of assets under management around the world, will now be including Qantas in their holdings (outside Australia).

This obviously adds huge liquidity and underlying demand to the Qantas share price and explains why investors have been fighting to get a hold of QAN shares today.

Foolish takeaway

Whilst I don’t think that the ebbs and flows of index funds are anything to get too excited over, I still think Qantas is a great company and a valuable one to own for dividend income. However, the company is heavily exposed to oil prices, so if these start to climb, it might be a bad time to own airline shares.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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 Scott Phillips.

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