All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Air Lease in Focus
Based in Los Angeles, Air Lease (AL) is in the Transportation sector, and so far this year, shares have seen a price change of -14.62%. The company that leases planes to airlines is currently shelling out a dividend of $0.22 per share, with a dividend yield of 2.14%. This compares to the Transportation - Equipment and Leasing industry's yield of 1.21% and the S&P 500's yield of 1.68%.
Looking at dividend growth, the company's current annualized dividend of $0.88 is up 3.5% from last year. Over the last 5 years, Air Lease has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.81%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Air Lease's current payout ratio is 18%. This means it paid out 18% of its trailing 12-month EPS as dividend.
AL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.48 per share, with earnings expected to increase 6.82% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AL is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Air Lease Corporation (AL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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