The board of Air Lease Corporation (NYSE:AL) has announced that it will pay a dividend of $0.21 per share on the 9th of October. This means the dividend yield will be fairly typical at 1.8%.
Check out our latest analysis for Air Lease
Air Lease's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Air Lease's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 5.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.
Air Lease Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.12 in 2014 to the most recent total annual payment of $0.84. This implies that the company grew its distributions at a yearly rate of about 21% 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.
Air Lease May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Air Lease hasn't seen much change in its earnings per share over the last five years.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Air Lease's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Air Lease you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
About NYSE:AL
Air Lease
An aircraft leasing company, engages in the purchase and leasing of commercial jet aircraft to airlines worldwide.
Good value with proven track record and pays a dividend.
