Did you own Qantas Airways Ltd (ASX: QAN) shares in 2024? If you did, you will no doubt have been smiling very widely at the end of the year.
That's because the airline operator's shares delivered a stunning annual return for investors.
The Flying Kangaroo ended 2023 at $5.37 and would go onto reach record highs numerous times during 2024 before eventually settling at $8.97 on New Year's Eve.
This means that Qantas' shares smashed the market with a 67% gain over the 12 months.
To put that into context, a $20,000 investment in the company's shares would have turned into approximately $33,400 over the period.
As a comparison, the ASX 200 index delivered a total return of 11.2% for investors last year.
Why did Qantas shares outperform?
Investors were buying the company's shares for a variety of reasons. The first and most obvious reason is that its shares were seriously undervalued at the start of 2024.
As covered here at the start of last year, Morgans felt that its shares were being undervalued by the market. The broker said:
QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings). The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further earnings growth over FY24/25.
Analysts at Goldman Sachs had long been saying the same thing as well. Both were proven correct as the year progressed and Qantas shares soared.
In addition, the company's strong performance in FY 2024, its positive guidance for FY 2025, and the prospect of dividends returning gave its shares an additional boost.
In respect to its results, Qantas reported a 10.7% increase in revenue to $21.9 billion and a 16% decline in underlying profit before tax to $2.08 billion. The latter was in line with the analyst consensus estimate for FY 2024.
Dividends likely to returns
It has been a while since we have seen a dividend from Qantas, but 2025 could be the year that payouts return.
A number of analysts believe that the company will pay its first dividend since 2019 when it releases its half year results in February.
For example, Morgan Stanley expects the airline operator will pay total dividends of 27 cents per share for FY 2025. This means that if you bought Qantas shares at the end of 2023 for $5.37 each, you would be receiving a yield of 5%. That's better than what some of the banks are offering now.
