Share of the U.S. Global Jets ETF (NYSEArca: JETS) are up nearly 2% Thursday, making the lone dedicated airline exchange traded fund one of the day’s best performers on a percentage basis and positioning the fund for one of its best intraday performances since coming to market in late April, after United Airlines said it will repurchase $3 billion worth of its own shares.
That announcement comes after Chicago-based United bought back $250 million of its own stock during the second quarter as part of a $1 billion buyback plan. Shares of United, the second-largest holding in JETS at a weight of 12.1%, are up 2.6% at this writing.
United’s massive buyback expansion continues a trend of increasing shareholder rewards from the airline industry and some big-name JETS constituents. In May Delta Airlines (NYSE: DAL), JETS’ largest holding, said “that it plans $6 billion in new stock buybacks and added dividends through 2017, the biggest single cash return to shareholders by an airline,” reports Jack Nicas for the Wall Street Journal.
Delta, 12.6% of JETS’ weight, boosted its quarterly dividend 50% to 13.5 cents per share. Southwest (NYSE: LUV), the longest-tenured dividend payer among airlines, also said in May it is boosting its quarterly dividend 25% to 7.5 cents per share each quarter. Texas-based Southwest also unveiled a $1.5 billion share buyback plan. Southwest is the second-largest holding in JETS at a weight of 11.4%. [New Airline ETF Could be a Success]
American Airlines (NasdaqGS: AAL), which yields 1%, introduced a dividend last year. “Over the past five years, dividends for the industry as a whole have increased 143%, according to Thomson Reuters data,” reports Michael Vallo for Barron’s.
United is the only member of JETS’ four largest holdings that currently does not pay a dividend, but as Barron’s notes, the company has left the door open to being a dividend payer. Alaska Air (NYSE: ALK) has doubled its dividend in two years, but half of JETS’ top 10 holdings currently do not pay dividends.
The top four holdings in JETS – Delta, United, Southwest and American — combine for nearly 48% of the ETF’s weight.
The next top five U.S. airlines receive a 4% weight. The remaining airline companies meeting the index criteria are then scored based on multiple fundamental factors driven by their cash return on invested capital, sales per share growth, gross margins and sales yield. Each of the four U.S. companies with the highest composite score receives a 3% weighting and each of the twenty non-U.S. companies with the highest scores receive a 1% weighting. [ETF Opportunity in the Friendly Skies]
JETS has traded slightly lower since debuting on April 30, but over the past month, the ETF has climbed 4.1%. The fund has amassed $47.3 million in assets under management since coming to market.
U.S. Global Jets ETF Top 10 Holdings
Chart Courtesy: U.S. Global Investors