The 20-cent dividend will be paid on Aug. 22 to shareholders of record on Aug. 6.
The announcement comes after Delta Air Lines Inc. said in May that it will begin paying a quarterly dividend of 6 cents. Delta also boosted its stock repurchase program at that time. Before Delta's dividend initiation, Southwest Airlines Co. was the only major U.S. airline to offer a dividend. Southwest said in May that it was raising its quarterly dividend and increasing its buyback to $1.5 billion from $1 billion.
The company said that the dividend will be financed from available cash and operating cash flow. It comes in addition to a $250 million repurchase program that started in September.
Alaska Air Group Inc. said that it is about a quarter of the way through the repurchase program, which it anticipates completing by 2014's end. The company has bought back more than $370 million of its stock since 2006 and paid down debt as well.
Shares of Alaska Air Group added $1.49, or 2.6 percent, to $59.03 in midday trading Thursday.