For much of the last decade, Webjet Ltd (ASX: WEB) shares were a decent option for income investors.
The online travel agent regularly shared in the region of 50% to 60% of its profits with shareholders.
That was of course until COVID-19 reared its ugly head. Since then, Webjet has been bleeding cash and unsurprisingly suspended its dividend payments.
But with trading conditions in the travel sector improving greatly in 2022, investors may now be wondering when dividends will return.
When will Webjet start paying a dividend?
According to a recent note out of Goldman Sachs, its analysts believe that Webjet could soon be in a position to start paying dividends again.
However, don’t get your hopes up for a dividend from Webjet in FY 2022. Goldman expects the company to report another sizeable loss this year before returning to profit in FY 2023.
At which point the broker expects Webjet to pay shareholders a 9 cents per share fully franked dividend. Based on the current Webjet share price of $5.59, this will mean a modest yield of 1.6%.
But it gets better. With the broker forecasting another jump in profits in FY 2024, it expects the company’s dividend to increase to a fully franked 14 cents per share. This equates to a more attractive 2.5% yield.
What is driving its return to profit growth?
Webjet’s return to growth is expected to be underpinned by the travel market recovery, a stronger and more profitable business model, and its growth engine – the WebBeds (bedbanks) business.
Goldman commented: “We expect WEB to benefit from the tailwind of travel recovery, offering structurally improved profitability and a strong outlook on the Bedbanks business, which we expect to resume the strong growth journey that it embarked on prior to COVID.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. 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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