(Bloomberg) -- Royal Caribbean Cruises Ltd. shares fell as investors overlooked it reinstating its dividend and instead focused on a possible signal the cruise company’s rapid growth is slowing down.
Royal Caribbean will pay a quarterly dividend of 40 cents per share, allowing stockholders to start sharing in its windfall from strong travel demand. The cruise operator halted its 78 cent payout in 2020 as it faced a pandemic-induced industry shutdown. Robust growth since then has seen it reach financial targets 18 months ahead of time.
“Exceptional demand for our vacation experiences has accelerated our performance by generating significant yield growth over the past several years,” Chief Executive Officer Jason Liberty said in a statement. That interest is showing no signs of abating with the company taking more bookings for 2025 than it has this year, fueled by stronger demand for its vacation experiences, he said.
Still, shares dropped as much as 6.7% at the open on Thursday, before paring some losses after the company’s earnings conference call. Shares have surged 27% this year though the close yesterday.
During that call, analysts shared investor concerns that growth in the amount of revenue that Royal Caribbean makes per cruise is set to slow in the fourth quarter. Net yields expanded 13% in the second quarter, though analysts expect growth to slow to 4.7% by the fourth quarter.
Royal Caribbean’s Liberty said passenger levels are normalizing but customers are forking out for higher fares.
“All the yield improvement that you’re seeing in the third quarter and fourth quarter is really being driven by price,” Liberty said on the earnings call. “These prices continue to increase as we build and manage demand.”
To be sure, some analysts dismissed the yield concerns. “It does not appear that today’s press release is anything but extremely positive,” Patrick Scholes, managing director with Truist Securities, wrote in a note.
The company also raised its full-year profit outlook for a third time this year. It now sees earnings of $11.35 to $11.45 per share. Its previous forecast was in the range of $10.70 to $10.90.
“Our accelerated performance and commitment to strengthening the balance sheet have allowed us to reduce both leverage and cost of capital, consistent with our goal of achieving investment grade metrics,” Chief Financial Officer Naftali Holtz said in the release. It should reach that threshold by year-end, Holtz added.
Peers Carnival Corp. and Norwegian Cruise Line Holdings both traded lower.
(Updates share move, adds analyst and management commentary on yield growth.)
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