Air Lease (NYSE:AL) Is Paying Out A Larger Dividend Than Last Year

The board of Air Lease Corporation (NYSE:AL) has announced that the dividend on 10th of January will be increased to $0.20, which will be 8.1% higher than last year's payment of $0.185 which covered the same period. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

Check out our latest analysis for Air Lease

Air Lease's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Even though Air Lease is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 9.7%, which we would be comfortable to see continuing.

Air Lease Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $0.10 total annually to $0.74. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Air Lease's EPS has fallen by approximately 30% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Air Lease's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think Air Lease is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Air Lease that you should be aware of before investing. Is Air Lease not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.