Should I buy Flight Centre shares for spectacular dividend growth?

Are Flight Centre shares primed for dividends?

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published January 10, 2023 3:10 pm AEDT

2023 has been kind to the Flight Centre Travel Group Ltd (ASX: FLT) share price so far. Since the start of 2023, Flight Centre shares are up a healthy 6.05%. Since October last year, investors have now enjoyed share price gains worth more than 9%. But you know what hasn't come alongside those gains? Dividends.

Flight Centre used to be a solid ASX dividend share. But this company hasn't paid a dividend for almost three years now, since the start of the COVID-19 pandemic to be exact.

So are the dividends coming back to Flight Centre shareholders anytime soon? Or is this company's dividend days behind it?

A woman ponders a question as she puts money into a piggy bank with a model plane and suitcase nearby. — Image source: Getty Images

When will Flight Centre shares start paying dividends again?

Well, before a company can afford a dividend, it first has to get back to profitability. And Flight Centre hasn't managed to get back in the black since the pandemic began.

Its full-year earnings for FY2022 which were delivered in August last year revealed a statutory loss before tax of $377.8 million, despite a massive surge in revenue. Now that was a 37% improvement on the prior year, but not enough to start filling the Flight Centre coffers for a dividend.

Saying that, a November trading update from the company asserted that the company had broken even on an underlying profit before tax basis. So things certainly seem to be moving in the right direction.

This could be compounded by China's reopening. The country has just sensationally relaxed its strict 'pre-COVID' policies which have kept it shut out from the rest of the world for the past three years.

Recent reporting from CNBC estimates that a fully reopened China could add close to 1% to Australia's economy, mostly through tourism. That's more good news for Flight Centre.

Last year, ASX broker Goldman Sachs estimated that Flight Centre would hold off on the dividends over FY2023, but might finally bring home the bacon in FY2024. If that does happen, Flight Centre shareholders would finally get their dividends back.

But I wouldn't expect a dime of dividend income from Flight Centre shares until its profits are sustainably back in the black.

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