Planes, Trains, and Self-Driving Automobiles

Kelly Green
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November 13, 2024
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Comments

Last week, I was traveling in both San Francisco and Miami. It was a week of different transportation methods: cable cars, subway, historic streetcars, buses, airplanes, the Brightline train, Uber, Lyft, and self-driving taxis.

The technology was vastly different among them all. My favorites were the two on either end of my spectrum—the cable cars and the self-driving taxis.

One of the core principles of a long-term dividend portfolio is to invest in companies that are integral to society and will be for many years to come. Transportation falls into that category.

The technology will change and the mode of transport will differ depending on the distance traveled. But people will always need and want to travel from one place to another.

Of all the modes of transportation that I used last week, a handful are publicly traded: JetBlue Airways Corp. (JBLU), Uber Technologies, Inc. (UBER), Lyft Inc. (LYFT), and Waymo’s parent company Alphabet Inc. (GOOG). JBLU, UBER, and LYFT do not pay dividends. GOOG pays $0.80 annually for a yield of just 0.44%.

None of these would work with our two-pronged dividend strategy. So, I decided to see if there are any transportation-related stocks with a decent dividend.

Does Rail Travel Have a Place in the Future?

The Brightline train started running between South Florida cities in 2018. It has since added stations, but I hadn’t taken the opportunity to use it.

From Port St. Lucie (where I live) to Brickell (where I was going in Miami) is only 122 miles. But if you’ve ever driven to Miami and paid to park, you’ll understand why I looked for another option.

Instead, I drove 50 miles to the train station in West Palm Beach and paid $39 for a ticket and parking. I definitely saved money and time, and would do it again. I discovered that Brightline is the only privately owned and operated intercity passenger railroad in the US. Unfortunately, it’s owned by Fortress Investment Group which is not publicly traded.

Amtrak is the primary operator of long-distance passenger trains in the US. And if you didn’t know, Amtrak was created by Congress in 1970 to take over passenger rail. The federal government owns all of Amtrak’s preferred stock.

In both Miami and San Francisco, I took the local rail-based commuter transportation. There might be an income opportunity in local public transportation, but it would be through municipal bonds. These would technically be interest payments instead of dividends, but could be a solid stream of income depending on the health of the municipality. And muni bonds are harder to find and not as liquid as stocks.

Looking Towards the Skies

The TSA keeps track of the number of travelers that pass through its checkpoints every day. This is one of the metrics I followed during COVID to track consumer sentiment about air travel. I still take a peek at them now and then just to see if there is a notable uptick in airline travel.

The level of air travelers is currently fairly flat compared to last year but still above the 2019, pre-COVID benchmark. Judging from my recent travels, I wouldn’t say the airports are full to bursting, but there is definitely a bustle I haven’t seen in a few years.

There are more options for dividend payers if you include airlines listed on foreign exchanges. Here, I only looked at those traded on the major US exchanges.

Unfortunately, the major US airlines don’t pay dividends that are worth our time. Spirit Airlines (SAVE) suspended its dividend earlier this year. Southwest Airlines (LUV), Allegiant Travel (ALGT), and Delta Air Lines (DAL) all pay a dividend, but the 2.2%, 3.2%, and 0.94% yields, respectively, don’t hit our minimum yield target.

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I did find one non-US based airline with a decent dividend: Copa Holdings (CPA). It’s based in Panama and its shares trade on the NYSE. The company has yet to announce its third-quarter earnings, but reported a Q2 net profit of $120.3 million, or $2.88 per share.

For Q2, management noted that passenger traffic for 2024 was up 10.6% year over year. The airline has been recognized as the “Best Airline in Central America and the Caribbean” by Skytrax for the past nine years.

CPA currently pays its investors $1.61 per quarter for an annualized yield of 6.49%. And it’s definitely the best opportunity I’ve seen to collect a dividend from air travel.

Unfortunately, it doesn’t look like there are many great dividend opportunities in transportation right now. That doesn’t mean I’ll stop looking, especially with technology constantly changing.

The Brightline here in Florida uses diesel-electric locomotives that run on biodiesel, but their new line from California to Las Vegas should be fully electric. And the Jaguar I-PACE cars used by Waymo are all-electric.

So, make sure transportation stocks aren’t a category you overlook. We never know when a rogue piece of news or a transitional period could give us a discounted share price and a yield worth our time and money.

For more income now, and in the future,