Aircastle
Dividend Yield: 5.9%
Market Cap: $776 million
What if you could invest in airline stocks and get a 6% dividend for the trouble? Well, that’s the shtick with Aircastle (NYSE:AYR), a company that leases almost 150 commercial and passenger airlines worldwide.
Aircastle is a lot like BOX in that it’s an end-around on conventional stocks in the sector. By simply leasing airplanes to others, it doesn’t have to deal with the direct impact of ticketing and baggage prices, fuel costs or freight rates.
A secular recovery in the economy would result in more leasing demand as more travelers and packages take to the air, so Aircastle could benefit big-time from this trend without the downside risk of oil prices gutting profits. Aircastle reported a 99% utilization in its most recent quarter, with lease rental revenue up 12%. The company posted a pretty big loss, however, on impairment charges of 15 older aircraft, but that didn’t stop Aircastle from boosting its dividend 10%. It still has a very low payout ratio of about 30%, indicating another dividend hike is a real possibility in 2013.
Also noteworthy is that the company also has been aggressively buying back shares, with around $120 million spent in the last 18 months. That’s a big chunk of change for a company this size.
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