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What are high yield stocks? Some say a dividend yield of 7% or higher qualifies, while others say 10% is the threshold.i don’t think anyone would disagree with that Amedeo Air for Plus (LSE: AA4) applies. Analysts believe he will reward shareholders with yields of 15.1% in 2023 and 17.5% in 2024.
I’m always curious when I see such eye-popping potential returns. Therefore, it is worth taking a closer look.
fly high
Amedeo, a specialist fund, goes public London Stock Exchange In 2015, cash raised from an equity (and debt) issuance was used to purchase and lease two A380 aircraft to Emirates. By 2018, after raising more equity and debt, it had amassed a fleet of 14 jets, of which it had leased eight to Emirates, two to Etihad and four to Thai Airways.
Etihad Airways outright purchased two leased aircraft on 24 February 2020. This was fortunate as the coronavirus pandemic ground flights worldwide within weeks. The cash was useful as the company had to forego lease payments and partially restructure completely. That didn’t stop us from canceling all returns of capital to our shareholders.
High Yield Stocks Warning
The company was confident enough to start paying a quarterly dividend of 1.25 pence on 31 January 2022. This has been raised from 1.5 pence to he 1.75 pence from April 2023 onwards. This is not far from the originally planned dividend of 2.06 pence. Analysts believe the company will hit again in his 2024.
Amedeo’s stock price is nearly double what it was two years ago, but is one-third what it was before the pandemic and half what it was when it went public. Investors seem to lack faith.
Thai Airways declared bankruptcy during the pandemic and is still in the hands of management. That lease fee is a big risk. If lost, Amedeo will have trouble finding new tenants for her four planes.of aviation industry has not yet recovered, but this is especially true for the long haul sector. All Amedeo planes are long-range models.
A recent company statement speaks to depressed long-range aircraft prices. Amedeo financed the purchase of the aircraft with approximately twice its equity in debt, so given the high leverage, shareholders would not be the winners in the event of a forced sale of the aircraft.
Amedeo Air for Plus shares
I think investors are right to be wary of this stock. Its high yield is probably appropriate if you need to give it some risk. This stock also has other curiosities that I’m not too keen on.
The company returns capital to shareholders through mandatory share redemptions. He’s had three so far, the latest being earlier this month. The company then recalled one of his shares at his 64.5 pence for every eight he owned. Its price is now well above the market price of about 42 pence, and has always been, if not so markedly, in the past.Still, I’m not happy with how this works, and on balance, I wouldn’t buy this stock for myself. Shares and Shares ISA and look elsewhere.
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