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Stock Review: Aircastle Ltd.
Aircastle Ltd. (AYR: 15.84 -0.17 -1.06%) caught my eye in March when the company slashed it’s quarterly dividend from 70¢ per share to 25¢. This was after 6 straight dividend increases from 16¢ to the earlier mentioned 70¢. The stock had peaked at about $40 last summer and had been declining steadily, with the downward slope steepening just before the dividend slash announcement. I think the early stock price errosion was tied the the overall credit crisis and it’s effect on a company that requires a lot of debt. The dividend cut was accompanied by the announcement the company wanted to preserve cash in difficult times. Internet scuttlebutt hinted at difficulty with funding sources. At this point, Aircastle has shored up it’s financing needs and the recently released Q1, 2008 earnings show a company in pretty good shape. Percentages shown are changes from Q1, 2007 and Q4, 2007. The net income before depreciation is the important one for a leasing company like Aircastle. The $83 million translates to $1.07 per share, giving excellent coverage to the 25¢ dividend. Since I failed to mention it earlier: Aircastle is in the aircraft leasing business. They currently own 136 aircraft, leased to 59 customers in 39 countries. 92% of the aircraft are to customers outside the U.S. and 25% are air freighters. The company went public in 2006 and acquired approximately 50% of its fleet in 2007. Going forward, growth should be more incremental with several economic trends in their favor. From listening to the last conference call and reading some of the press releases, I believe Aircastle is in a strong economic position to both grow their business and start increasing the dividend again. On the conference call, management made no commitment about the dividend, but the previous policy was 70% of free cash flow (net income before depreciation). For this last quarter, that number was $1.07 per share. Even if the 70% was too big a slice, 40% to 50% equals to a doubling of the dividend. AYR currently yields 6.3% on the $1.00 per year dividend. I am adding this stock to my site’s Income Portfolio with the expectation of both dividend and share price increases over the next year. by Tim Plaehn (Investing Thoughts) Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital. |
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