Investors may not necessarily think of an airline when it comes to passive income. But, at the current Qantas Airways Ltd (ASX: QAN) share price, it may well be a potential opportunity for dividends.
One of the benefits of considering an airline is that it has an exceptionally low price/earnings (P/E) ratio. The lower the P/E ratio, the higher the dividend yield. The size of the dividend is another factor in how large the dividend yield is.
So, let's take a look at how appealing the Qantas share price is and if the dividend yield is appealing.
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Potential dividend income
No dividends are guaranteed of course, but analysts have projected how much passive income the business could deliver in the coming financial years.
Given the volatility the fuel and travel industries have seen in the last few years, it's understandable that it's harder for analysts to predict what the airline could deliver in the coming years.
We are currently in the 2027 financial year, so I'll focus on the potential dividend payout for the current period. But I'll also mention the projected payout for FY26 too – the actual payout will be revealed next month during reporting season.
According to the projection on Commsec, Qantas is forecast to pay an annual dividend per share of 39.6 cents in FY26. That translates into a grossed-up dividend yield of 5.7%, including franking credits, at the time of writing.
Of course, the more important projection is FY27. In the 2027 financial year, Qantas is estimated to pay an annual dividend per share of 44.8 cents. At the time of writing, that translates into a grossed-up dividend yield of 6.4%, including franking credits.
Is the Qantas share price a buy?
The airline is in a much stronger situation than it was five years ago. To be in a position to be paying dividends now is a pleasing recovery by the airline, with its earnings and balance sheet in a strong position.
A 6% dividend yield is not exactly the biggest the biggest on the ASX. I wouldn't buy Qantas shares just for the dividend, though I wouldn't necessarily buy any investment just for the passive income. The valuation and the long-term appeal of the business is more important to me.
Travel demand has remained surprisingly strong since the opening of borders after COVID-19 restrictions. While fuel costs may remain high, I think the company may be able to offset that with higher fare prices.
According to CMC Invest, of 11 analyst ratings within the last three months, all of them were buy ratings, so the market is very positive on the airline at the moment.
