FLY: Caution, The Dividend May Be In Danger

Back in November of last year I wrote that Fly Leasing (NYSE: FLY) was a good stock to own since it was paying 7%. The chart below shows that the price of the stock began to climb from that point until recently. However, the recent decline in the market has hurt the selling price of FLY so that the yield of the $1.00 annual dividend is now around 6.7%. Since this looks like a good buying opportunity again for this issue, I thought it might be wise to look at what is happening at the company recently.Double Dividend Stocks had an article published on May 30th of this year, which made some favorable comparisons between FLY and other aircraft rental stocks such as AYR, AL, AVOL and AER. While FLY is the smallest of the companies, the article declared that it looked "cheaper on a P/Book, P/Sales and a P/E basis." Besides that, it offers a better dividend than all the other aircraft rental companies.On June 1, the company stated that it was selling 33 aircraft for $985 million, which would create a pre-tax gain of $35 million. Management further stated that the sale would generate unrestricted cash of $425 million, which would decrease leverage from 3.5 times to 2.2 times. BBAM, the management firm that runs FLY, announced that it has reduced the annual management fee by $5 million annually as well owning 8% of FLY's shares. Furthermore FLY has reduced average fleet age, while at the same time increasing the average remaining lease term. See the graph below: (Source)FLY's... Read more

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