Even with last year’s surge on the back of falling oil prices, JETS’ holdings are not richly valued relative to the broader market. The ETF’s underlying index shows a forward price-to-earnings ratio of about 9. In contrast, the S&P 500 index is trading near a 18.6 P/E. [Fuel Costs and Transport ETFs]
“An important metric Deutsche Bank uses to illustrate that the industry is in expansion mode is operating margin, which measures a company’s efficiency in generating revenue. This figure tells you how much of each dollar earned the company keeps as profit after taxes. Generally speaking, the higher the number, the more efficiently the company is being run and the more capital it can use to pay down debt and return to investors in the form of stock buybacks and dividends,” according to Holmes.
For years, airlines were lousy dividend payers, but that is starting to change. Delta’s payout surged 50% last year while Soutwest’s dividend has risen sixfold since 2012. Those are JETS’ two largest holdings and combine for nearly 24% of the new ETF’s weight.
JETS Top 10 Holdings
Table Courtesy: U.S. Global Investors