Updated 3/5/25
Air Lease Corporation (NYSE: AL) is one of the leading aircraft leasing companies, providing fleet financing solutions to airlines worldwide. Since its founding in 2010, the company has built a strong reputation for supplying new, fuel-efficient aircraft to commercial carriers across multiple continents.
With a steady stream of long-term leasing agreements, Air Lease benefits from predictable cash flows, making it an interesting choice for dividend-focused investors. While not a high-yield dividend stock, its history of consistent payouts and strong operational performance makes it worth a closer look.
Key Dividend Metrics
📊 Dividend Yield: 1.95%
💵 Annual Dividend Per Share: $0.88
📅 Next Dividend Payment: April 7, 2025
📉 Ex-Dividend Date: March 18, 2025
📈 5-Year Average Dividend Yield: 1.81%
💰 Payout Ratio: 25.53% (Lower payout means more reinvestment potential)
📊 Trailing Annual Dividend Yield: 1.88%
⚖ Dividend Growth Rate (5-Year): Moderate but consistent
Dividend Overview
Air Lease pays dividends on a steady basis, making it a reasonable choice for investors seeking passive income. The company’s current dividend yield of 1.95% is slightly higher than its five-year average of 1.81%, suggesting stability in its payout strategy.
The forward annual dividend per share has increased slightly to $0.88, showing management’s commitment to rewarding shareholders. With a payout ratio of just over 25%, Air Lease comfortably covers its dividend obligations while keeping enough cash on hand for future investments.
While the company isn’t known for aggressive dividend hikes, it has maintained an upward trend in payouts. Investors who prefer slow but steady dividend growth may find this appealing, particularly given the company’s relatively low payout ratio.
Dividend Growth and Safety
Air Lease has a history of maintaining its dividend and increasing it at a controlled pace. While some companies aim for rapid dividend growth, this aircraft lessor has taken a more measured approach, ensuring financial stability while still delivering shareholder returns.
With a payout ratio of just over 25%, the dividend is well-covered by earnings. This means the company has plenty of room to keep increasing its payouts over time without putting too much strain on its financials.
Cash flow is a major factor in dividend safety, and Air Lease generates a healthy amount of it. The company reported $1.68 billion in operating cash flow, supporting its ability to keep paying and potentially increasing dividends. However, the business is capital-intensive, requiring large amounts of funding to purchase aircraft, which makes debt management a key factor to watch.
Chart Analysis
The stock price of Air Lease Corporation (AL) has been fluctuating within a defined range over the past year, with noticeable volatility. The 50-day simple moving average (SMA) and the 200-day SMA provide insights into the stock’s overall trend.
Recently, the 50-day moving average (orange line) has been trending downward and is now below the 200-day moving average (blue line). This formation, often referred to as a death cross, suggests that the stock may be experiencing weakness in the short term. Historically, this signal can indicate the potential for continued downward pressure if selling momentum remains strong.
The price recently tested the $46 level, aligning closely with both the 50-day and 200-day SMAs. This could act as an important support or resistance level depending on upcoming price action. If the stock fails to hold above this level, it may retest the lower range seen earlier in the year. However, a decisive move above the moving averages could indicate a shift in momentum toward recovery.
Looking at the Relative Strength Index (RSI) at the bottom of the chart, the stock is hovering around neutral territory. It has not yet entered the oversold zone but also lacks the strong momentum required to push higher. This suggests a lack of strong buying pressure, meaning the stock could remain range-bound unless a catalyst emerges.
Volume trends indicate relatively low trading activity, with no major spikes suggesting strong conviction in either direction. Without a significant volume increase, price movements may continue to be choppy and indecisive.
From a technical perspective, the stock is at a critical juncture, with key moving averages converging. The next few trading sessions will be important in determining whether the stock can regain strength or continue drifting lower.
Analyst Ratings
📈 Upgrades:
🟢 In February 2024, BMO Capital Markets adjusted its price target for Air Lease from $54 to $55, maintaining an outperform rating. This revision reflects optimism about the company’s strategic aircraft acquisitions and strong airline partnerships, which are expected to drive long-term growth.
🟢 In April 2024, Barclays raised its price target on Air Lease from $48 to $55, reiterating an overweight rating. Analysts pointed to the company’s expanding leasing portfolio and the anticipated demand for new aircraft as airlines look to modernize their fleets.
📉 Downgrades:
🔴 In August 2024, JPMorgan lowered its price target for Air Lease from $54 to $52, while keeping an overweight rating. The downgrade stemmed from concerns about rising interest rates, which could increase borrowing costs and put pressure on the company’s margins.
🔴 In August 2023, Bank of America adjusted Air Lease’s price target from $65 to $60, maintaining a buy rating. The change reflected a more cautious outlook on near-term earnings, as analysts weighed macroeconomic uncertainties and industry-wide challenges affecting the aviation sector.
📊 Analysts remain divided on the stock, with some seeing strong long-term growth potential while others express concerns about external economic pressures. The consensus price target is currently $58.50, suggesting potential upside if the company can navigate interest rate challenges and sustain leasing demand.
Earning Report Summary
Air Lease Corporation recently shared its latest earnings report, giving investors a look at how the company performed over the last quarter and the full year. The results were a mix of positives and challenges, reflecting the ongoing shifts in the airline and leasing industries.
Quarterly Performance:
In the fourth quarter of 2024, Air Lease brought in $712.9 million in revenue, which was slightly lower than the same period last year. The dip was mainly due to fewer aircraft returns and a decline in end-of-lease revenue. While the company continues to expand its fleet, the pace of revenue growth has slowed a bit.
Net income came in at $93 million, or $0.83 per share, which was lower than last year’s $211 million. The biggest reason for this drop was higher interest expenses, as borrowing costs increased due to rising interest rates. That said, Air Lease still managed to book $65 million in gains from aircraft sales, selling 14 planes in the quarter, up from eight in the previous year.
Full-Year Performance:
Over the entire year, the company’s rental revenue grew slightly, reaching $2.5 billion. This steady growth was driven by fleet expansion, but it was offset by lower lease yields as newer aircraft entered service with lower initial lease rates.
Net income for the full year landed at $372 million, or $3.33 per share, which was down from $573 million the previous year. The drop in earnings was largely due to higher interest costs and the fact that last year’s numbers had a one-time insurance settlement that boosted profits.
As of the end of 2024, Air Lease’s fleet value had climbed to $28.2 billion, with 489 aircraft in operation. The fleet remains young, averaging about 4.6 years old, and is spread across 116 airline customers in 58 countries.
Challenges and Looking Ahead:
Like most aircraft lessors, Air Lease is dealing with ongoing delivery delays from Boeing and Airbus, which is making fleet expansion a bit more complicated. However, despite these hurdles, the company had a strong year, investing $5 billion in new aircraft while also selling $1.7 billion worth of planes.
Looking forward, the company expects continued demand for leased aircraft, especially as airlines struggle to get new planes from manufacturers on time. With aircraft shortages expected to continue for the foreseeable future, Air Lease sees opportunities to raise lease rates and maintain strong aircraft values.
While 2024 came with its challenges, Air Lease continues to show resilience, positioning itself well for the long-term growth of the aviation industry.
Financial Health and Stability
Air Lease is a capital-heavy business, and like most leasing companies, it carries a significant amount of debt. The company has a total debt of $20.21 billion, resulting in a high debt-to-equity ratio of 268.3%. While this may sound concerning, it’s common in the aircraft leasing industry, where companies borrow large sums to acquire new planes and lease them to airlines over time.
Despite this high leverage, the company remains profitable. It reported a 15.65% profit margin and an impressive 50.68% operating margin, showing it runs an efficient operation. While quarterly earnings recently declined by nearly 49% year-over-year, long-term cash flow remains strong.
Short-term liquidity is something to keep an eye on, as the company’s current ratio of 0.44 suggests that short-term assets are lower relative to short-term liabilities. However, given the long-term nature of its leasing contracts, the company prioritizes steady revenue generation over short-term liquidity metrics.
Valuation and Stock Performance
At its current price of $45.98, Air Lease trades at a trailing price-to-earnings (P/E) ratio of 13.56, which appears reasonable for a company in the leasing sector. Some key valuation metrics suggest the stock might be undervalued, including a price-to-book (P/B) ratio of 0.67, meaning it trades below its book value.
Enterprise value relative to revenue stands at 9.06, which is in line with capital-heavy businesses. Compared to historical levels, the stock’s valuation seems fair, making it a potential candidate for long-term investors looking for stable dividend payers.
Over the past year, the stock has traded between $39.43 and $52.31. Currently, it sits below its 50-day moving average of $47.21 but remains above its 200-day average of $46.63. With a beta of 1.62, the stock is more volatile than the broader market, meaning price swings could present both risks and opportunities for investors.
Risks and Considerations
While Air Lease has a reliable dividend, it’s important to consider the risks that come with investing in an aircraft leasing company.
🚨 High Leverage: The company’s business model relies on significant borrowing. A debt-to-equity ratio above 260% means rising interest rates or economic downturns could impact profitability.
✈ Airline Industry Exposure: The airline sector is cyclical, with periods of strong demand followed by downturns. If airlines struggle, they may look to renegotiate lease terms or return aircraft early, potentially affecting Air Lease’s revenue stream.
📉 Earnings Volatility: The company recently posted a sharp decline in quarterly earnings. While leasing revenue is typically stable, fluctuations in aircraft values, lease pricing, or interest expenses could impact profitability.
🔄 Dividend Growth Pace: While the dividend is steady, it grows at a conservative rate. Investors looking for high-yield or fast-growing dividends might find better opportunities elsewhere.
Final Thoughts
For investors seeking a mix of income and long-term stability, Air Lease presents an interesting option. The company has a manageable dividend payout, strong operating margins, and a well-structured leasing business that generates steady cash flows.
Its dividend yield, while not the highest, is reliable and backed by a low payout ratio, giving it room to grow in the future. However, the high debt load and industry risks mean investors should carefully consider whether this type of business aligns with their risk tolerance.
Those comfortable with the cyclical nature of the airline sector and Air Lease’s financing-heavy model may find it to be a worthy addition to a dividend portfolio, offering steady income with the potential for modest capital appreciation over time.
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