In the roughly 16 months since the pandemic shut down the cruise industry at U.S. ports, every cruise line has been losing money.
Royal Caribbean and its peers have had to borrow money at very high interest rates. Even as cruise lines tighten their belts as much as possible, fees still have to be paid. Ships can’t just dock; when they dock, they still have to pay.
Royal Caribbean and every other company must keep crew members on board to maintain them. The ship needs fuel and the crew needs food. Rent for the onshore buildings still needs to be paid and the private island must be maintained.
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Money is being spent and only a little bit is coming in.
Even if the industry is allowed to return, ships are sailing well below capacity, partly due to social distancing and partly due to Americans’ reluctance to sail.
For the first six months, and possibly even the first year, it looked like the cruise industry might not be able to recover.
Vaccines and time eventually changed everything, and people remembered how much fun it was to take a cruise. For Royal Caribbean, this led to a massive comeback and a return to profits.
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Image source&col;Royal Caribbean
Royal Caribbean has pulled out of the abyss
Earlier this year, Royal Caribbean reinstated its dividend, something that would have seemed unthinkable just a few quarters ago.
Companies pay dividends to return cash to shareholders. They will only do this if they have all the cash they need to meet their obligations and drive growth.
To be able to return money to investors, Royal Caribbean must pay down and rehabilitate its debt and return to profitability.
Royal Caribbean continued to deliver strong results in the third quarter.
The company reported third-quarter net income of $1.1 billion, or $4.21 a share, compared with $1 billion, or $3.65 a share, a year earlier. The increase per share was 15%. Adjusted profit, excluding special items, was $5.20 per share, an increase of 35% from $3.85 in the same period last year.
The cruise line’s capacity utilization rate was 111% and profit margins expanded 13.4%.
“We wake up every day and are fully focused on our mission to provide our guests with the best vacation experience of a lifetime,” Royal Caribbean CEO Jason Liberty said in a statement.
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Royal Caribbean withdrew its dividend, then raised it
As part of its second-quarter earnings call in July, Royal Caribbean said it had emerged from the dark days of the coronavirus pandemic. The board of directors declared a dividend of 40 cents per share, which will be paid on October 11 to shareholders of record on September 20.
It’s a low-key way to deliver news that once seemed impossible. Royal Caribbean was pushed to the edge by a crisis no one could have imagined, but somehow the company not only survived, but thrived even further than its pre-COVID success.
It wouldn’t be considered an overreaction if Liberty shouted the news like a professional wrestler celebrating winning a world title while yelling “Let’s go!”
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Now, the cruise line has built on that success.
On December 11, the board of directors announced a quarterly dividend of 55 cents per share, a 38% increase from the previous dividend. The latest dividend will be paid on January 13 to shareholders of record on December 27.
“This increase reflects the company’s ongoing efforts to enhance shareholder returns,” RCL said in a brief release.
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