Expedia (EXPE) hikes payout by 8%, but offers a low 0.92% dividend.

Expedia’s (NYSE:EXPE) dividend was increased by 8%.  Its overall yield is 0.92%. The firm started paying a dividend in 2010.

Expedia is one of the largest internet travel firms in the world. It operates several key brands including Expedia.com, Trivago.com, Hotwire.com, Hotels.cm, Orbitz.com, and HomeAway.com  The firm, through its prominent website, books for its clients hotels, car rentals, airline tickets, and various other travel related transactions. It serves both individual and business customers. It also maintains key international sites like Wotif.co.nz, lastminute.com.au, and travel.com.au. The company was founded in the beginning stages of the internet age in 1996.  The large travel firm is headquartered in Bellevue, Washington.

Expedia has maintained a three-year growth rate of dividends of 18 percent. Expedia currently ranks 3rd in dividend yield within the large cap services, general entertainment category. The quarterly dividend for the March payment will be $0.28 versus the prior year rate of $0.26 per share. Expedia is not a member of our Top 100 Dividend Stocks.  (see below).

The dividend will be paid at the new higher rate on March 30, 2017, to shareholders of record at close of business on March 9, 2017. Expedia Inc. is currently priced at $129.60. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
3/9/2017 0.28
11/15/2016 0.26
8/23/2016 0.26
5/24/2016 0.24
3/8/2016 0.24
11/17/2015 0.24
8/25/2015 0.24
5/26/2015 0.18
3/6/2015 0.18
11/18/2014 0.18
8/25/2014 0.18
5/28/2014 0.15
3/6/2014 0.15
11/19/2013 0.15
8/26/2013 0.15
5/28/2013 0.13
3/7/2013 0.13
11/14/2012 0.13
8/24/2012 0.13
5/25/2012 0.09
3/8/2012 0.09
12/21/2011 15.125 special
11/16/2011 0.14
8/24/2011 0.14
5/25/2011 0.14
3/9/2011 0.14
11/16/2010 0.14
8/24/2010 0.14
5/25/2010 0.14
3/9/2010 0.14


Analysis of Expedia is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 0.92% 385
Dividend Growth (3-7 year avg) 14.6% 132
Forward P/E 17.69 156
S&P Financial Rating BBB- 160
Beta 1.25 200
Total Score 1,033
% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr low Yield % 5 yr max Yield %
0.92% 18% 11% 68.05 1.78 0.80 3.70 0.58% 1.71%

Positives;

  • Expedia has paid out a dividend consecutively for the past 7 years.
  • Expedia maintains an investment grade rating of BBB-.
  • Expedia has maintained a three-year growth rate of dividends of 18 percent.
  • Expedia is trading below its ten-year average price/sales (P/S) ratio.

Negatives;

  • Expedia’s dividend yield is below that of the S&P 500 Index.
  • Expedia maintains a beta of 1.25, higher than the average company.
  • Expedia’s current dividend yield (0.92%) is lower than its five-year average historical dividend yield.

Latest Earnings & Overall Analysis:

Expedia issued its earnings data on February 9th. The company reported $0.97 EPS for the Q4 quarter, missing the consensus estimate of $1.11 by $0.14.  Revenue rose a stellar 23% to $2 billion, which was slightly over analyst estimates.  For Q4, the firm took in slightly over $16 billion in revenue from online bookings. This was a rise of 8% from Q4 of 2015. In addition to the increased bookings, guests also had additional days of rental about just over 15%.  Mobile traffic continues to accelerate for Expedia. Customer utilizing the various apps for booking travel used the sites more frequently and nearly one-third of overall booked traffic came from mobile users.

Expedia’s growth has been spurred not only by the move to mobile and booking more travel over the internet, but also through the additions of the HomeAway and Orbitz brands through acquisitions. These new online travel websites added nearly $1.5 billion in revenue for the firm during 2016.  The Trivago brand has also excelled. The firm was spun off from Expedia last year with Expedia retaining a near two-third interest in the company.  Hotels still make up the bulk of Expedia’s business and accounted for 60% of worldwide revenue during 2016.

2016 2015 2014 2013 2012
Earnings per Share 1.9 3.21 3.12 2.5 2.67
Annual Dividend 1 0.84 0.66 0.56 0.44
Payout Ratio 52.63% 26.17% 21.15% 22.40% 16.48%

Expedia’s global market share is just over 6% today. Its largest competitor is Priceline. But with the additions of HomeAway and Orbitz, the firm should continue to garner additional market share over the next few years.  Nearly two-third of the firm’s overall revenue is from the U.S.  Thus, there is much opportunity in overseas markets. This despite Priceline’s leading network advantage in Europe.  China is also a very large market and could account for a nearly a quarter of sales within the next five years.

Shares of Expedia have tripled over the last five years. This company remains a high growth firm. Thus its dividend is low compared to larger, more traditional large-cap companies. Expedia pays less than a 1% yield and has a payout ratio for 2017 of just over 30%. Its beta is much higher than the average stock. The firm does maintain an investment grade rating and strong dividend growth.   I would expect the payout ratio to rise to closer to 50% over the next five years as the firm matures.

Earnings per Share 2017 (projected) 3.52
Dividend 1.12
Payout Ratio 32.00%
Based on the firm’s low dividend yield and high beta, Expedia Inc. does not qualify as one of our Top 100 Dividend StocksPlease subscribe to our monthly premium newsletter to find out more about which stocks are listed in our model portfolio.  

Expedia Inc. Dividend Yield Historical Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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