Aircraft Leasing Stocks: Positioned for a Strong Takeoff or a Crash Landing? Fly Leasing (FLY), Aircastle Limited (AYR) & AerCap Holdings N.V. (AER)

Aircraft leasing stocks like Fly Leasing (NYSE: FLY), Aircastle Limited (NYSE: AYR) and AerCap Holdings N.V. (NYSE: AER) are benefiting from low asset prices that makes it attractive to acquire aircraft and then lease them back to airlines and other groups. On the other hand and earlier this year, the head of AerCap Holdings N.V. (AER) has warned that both Airbus and The Boeing Company (NYSE: BA) are building too many aircraft while a recent article article in Business Jet Traveler pointed out that nearly 400 regional jets were in storage in the US (many of them less than 10 years old) at the end on 2011. Moreover, many regional airlines can’t pull out of small Midwest airports (where the author lives) fast enough give $100 a barrel oil prices plus bankrupt AMR Corporation (AAMRQ), the owner of American Airlines, could end up parking a couple hundred more Embraers belonging to its American Eagle regional subsidiary. Hence, are aircraft leasing stocks Fly Leasing (FLY), Aircastle Limited (AYR) and AerCap Holdings N.V. (AER) really a good idea right now? Here is a closer look to help you decide:

Fly Leasing (NYSE: FLY) Has Just Raised Its Dividend

Fly Leasing is a global lessor of commercial jet aircraft to airlines around the world. On Thursday, Fly Leasing reported that 1Q2012 revenue rose by more than 100% from the same period last year while EPS and Adjusted Net Income per share grew by over 600% and the company ended the quarter with $159 million in unrestricted cash. Fly Leasing also acquired two aircraft to bring its fleet total to 111 plus the company stated that last year’s aircraft acquisitions have helped to propel results. Fly Leasing also has a forward dividend of $0.80 for a dividend yield of 6.4% but the company also announced yesterday that it will increase its dividend by 10%. On Thursday, Fly Leasing rose 4.83% to $13.02 (FLY has a 52 week trading range of $10.00 to $14.54 a share) for a market cap of $334.43 million plus the stock is up 4% since the start of the year, down 3.9% over the past year and down 42.9% since late 2007.

Aircastle Limited (NYSE: AYR) Has a 5% Dividend Yield

Aircastle Limited is a global company involved in the acquisition, leasing and selling of high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. On Thursday, Aircastle Limited reported that 1Q2012 lease and rental revenue rose but maintenance revenue fell while gains on selling flight equipment plunged from $9.7 million a year ago to just $196,000. Specifically, Aircastle Limited reported that total 1Q2012 revenues rose 4% to $164.9 million while net income fell 24% to $32.6 million. However, Aircastle Limited did note the $1 billion in investments made last year and the $400 million in acquisitions since the start of the year thanks to an attractive investment environment will further enhance the company’s future profitability. On Thursday, Aircastle Limited rose 1.16% to $12.26 (AYR has a 52 week trading range of $8.53 to $14.55 a share) for a market cap of 887.32 million plus the stock is down 3.6% since the start of the year, down 1.6% over the past year and down 63.5% over the past five years. Its also worth noting that Aircastle Limited has a forward dividend of $0.60 for a dividend yield of 5%.

AerCap Holdings N.V. (NYSE: AER) Will Report Earnings Next Tuesday

AerCap Holdings N.V. is a Netherlands based integrated global aviation company that acquires aviation assets, leases these assets to suitable lessees, manages the funding and other lease related costs and provides aircraft management services. AerCap Holdings N.V. will announce earnings on Tuesday after the market opens in the USA. Otherwise, investors should note that for 2011, AerCap Holdings N.V. reported net income of $172.2 million verses $207.6 million for the previous year but 2011 adjusted net income rose 35% from $223.9 million in 2010 to $303.1 million. Its also worth noting that AerCap Holdings N.V. has some purchase-leaseback transactions involving American Airlines – something investors should look further into. Likewise and since AerCap Holdings N.V. pays no dividend and the stock is up 0.97% since the start of the year, down 20.4% over the past year and down 60.42% over the past five years – there is not too much to get excited about before earnings. On Thursday, AerCap Holdings N.V. is up 1.15% to $11.40 (AER has a 52 week trading range of $8.77 to $14.12 a share) for a market cap of $1.64 billion.

The Bottom Line. Investors might want to just flow over aircraft leasing stock AerCap Holdings N.V. (AER) and land with Fly Leasing (FLY) and Aircastle Limited (AYR) for their attractive dividend yields BUT investors also need to be extremely wary and keep a close watch on the state of the airline industry as well as the American Airlines bankruptcy.