Airline stocks have generally done extremely well over the past decade, as favorable conditions in the industry have lifted the surviving major airlines following extensive consolidation. Among the biggest carriers, Delta Air Lines (NYSE:DAL), United Continental Holdings (NASDAQ:UAL), and American Airlines Group (NASDAQ:AAL) have all taken their fair share of profits from their businesses. Yet more recently, the pace of gains has slowed somewhat for the major airlines, and some investors want to know which of them has the best prospects for a stronger advance in 2018. Let's compare Delta, United, and American in several key metrics to see which looks more attractive currently.

Valuation and stock performance

The three airline stocks saw mixed performance in 2017. Delta led the pack with a 14% rise, and American was only slightly behind by picking up 11%. United, however, suffered an 8% decline.

All of the airline stocks look fairly inexpensive when you look at earnings-based valuations. Income figures for the past 12 months show United trading below 11 times trailing earnings, with Delta coming in a bit above 11 and American just slightly higher at a trailing multiple of 13. When you look at future earnings estimates, Delta takes the lead with a forward multiple of less than 10, but both American and United sport multiples of less than 11 on a forward basis. There's just not that much of a disparity among the three stocks when it comes to valuations.

Left side of a Delta aircraft, with left wing and engine highlighted on a cloudy day near sunset.

Image source: Delta Air Lines.

Dividends

Where there are some big differences between the major airlines is on the dividend front. United Continental doesn't pay a dividend at all, while American has a yield of just 0.7%. Delta, however, is fairly generous with its dividends, having recently boosted its payout above the 2% mark.

To some extent, dividend policies reflect the recent merger experience of the respective airlines. American just came out of bankruptcy a few years ago, and its merger with US Air required some effort to consolidate effectively. United and Continental are still going through growing pains in their merger, even though it took place before the US Air-American deal. Yet Delta has had the most time to solidify its post-merger business with Northwest's old operations, and that has led not only to healthy dividend payments but also big increases, including 50% jumps in each of the past four years. With a payout ratio of just 20%, Delta is the clear winner when it comes to dividends.

Growth profile and risks

These three major airlines have a lot in common, both in terms of growth and risks. For instance, tax reform is likely to benefit all of the airline companies, because their huge capital expenditures should reap increased tax breaks in the coming years, and lower corporate tax rates will help them significantly.

Yet the airlines also have specific positives and negatives. Delta has done a good job of wooing business travelers, topping one key survey in every major category. However, the airline has had difficulty keeping its costs under control, and although some factors like fuel expenses aren't easy to manage, non-fuel costs have risen at a disturbing pace. Capacity growth and newer aircraft should help reduce some costs, but Delta will have to remain vigilant to avoid problems ahead.

For both American and United, the fact that each has extensive losses that they've carried forward for tax purposes means that the benefits of tax reform won't be as apparent as they've been for Delta. Moreover, some analysts worry that American and United are vulnerable to the rise of smaller carriers, which could see more of an immediate impact from tax reform.

Stories involving bad customer experiences have also had an impact on particular airlines. Early in 2017, United had to deal with fallout after a passenger who had boarded an overbooked flight was forcibly removed from the airplane, creating a social media frenzy and regulatory backlash. Computer outages also affected Delta and United, raising concerns about potential vulnerability to cyberattacks.

From a more fundamental basis, American's chief issue appears to be ensuring that the airline can live up to its ambitious projections for future growth while holding competition at bay. United needs to find a strategic vision that's consistent with industry conditions while at the same time making sure that its fleet is well-positioned to deliver on its strategy. And Delta should keep working to improve efficiency and bolster its reputation.

Your best bet?

Based on all of these factors, Delta Air Lines offers the best mix of value, dividend income, and growth potential. United and American have plenty of potential upside, but so far, Delta has done the best job of the three of capitalizing on the rise in the airline industry, and it has a clear path to further success in 2018 and beyond.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.