Genesis Lease: A High-Flying, High Dividend Stock

Genesis Lease, (GLS), based in Ireland, is a dividend paying stock which leases aircraft and various aviation assets to a diverse group of international airlines. Like other airline-related stocks, GLS' share price and business has suffered during the downturn.

When the share price plummeted in late 2008, their conservative management cut the dividend from $1.88/share annually (it was then yielding over 30%), to $.40/share annually, which, at a current dividend yield of almost 6%, still puts GLS in the high dividend stocks group.

GLS' business model calls for long-term leases, (over 7 years), to its customers, and has 51 of its 54 aircraft in operation with 34 airlines in 21 countries. Of the three aircraft which were non-revenue generating at the end of the June 30, 2009 quarter, two have since been delivered to a new customer and the remaining aircraft is expected to deliver in the third quarter. There is only one more lease expiring in 2009, and 3 in late 2010. The firm also purchased one new aircraft this year.

The company managed to improve its EBITDA by 4.3% for the 6 months ending 6/30/09, and 1.3% for the quarter.

Comparing GLS to other stocks in its peer group industry yields the following comparisons:

Genesis Lease vs. Rental/Leasing Services Industry

	GLS	Industry
P/E	6.15	15.60
P/Book	.44	3.41
Price/Free Cash Flow/Share	2.45	14.86
Long Term Debt/Equity	2.23	2.82
ROE	7.10	-8.60
ROA	2.07	-.90
ROI	87.85	-.85
Revenue/Employee	$11.26 million	$.70 million
DIvidend Yield	5.87%	2.32%

GLS has no current short term debt.

While there are other dividend stocks in this group with a high dividend,

GLS has the advantage of also having options available on its shares.

Short term investors looking to increase their income on GLS could do so by selling covered calls. January $7.50 calls, (GLSAU), are currently worth a $.50 bid, which would add another 7% to the yield.

In addition, this would set up an opportunity for an additional $.68/share capital gain, (almost 10%), if the stock rises to or past $8.00, (the combo of the strike price plus the call bid).

• Current Price: $6.82/share
• Static Yield: 12.87%, (36.7% annualized)
• Assigned Yield: 22.87%, (65.22% annualized)

Disclosure: Author is long shares of GLS

Comments

[biomedlives:]

What is the average age of its fleet?

Sep 11 10:15 AM

[spearson11:]

The average age of GLS's fleet is 7.1 years.

Sep 11 12:01 PM

[User 288980:]

What do you think of the Apr 7.50 option.

Sep 11 12:43 PM

[Stone Fox C...:]

interesting comparison of the rental leasing industry. What stocks does that include? Most airplane leasors like AER, AYR, and FLY trade at similar valuations to GLS.

Sep 14 06:56 PM