My First Purchase – [ASX:AIZ] – Air New Zealand

By | December 30, 2016

Why I bought Air New Zealand as my First Stock

At the time of posting, ASX:AIZ are 2.09. Current value: AIZ 2,28 +0,04 +1,79%

Well, I finally purchased my first stock…. ok so this is a little in retrospect, seeming I have already bought this in October and I’m only just now posting it. I’ve also made another post about another share purchase.

New website, so new posting.
Needless to say, this is a very exciting time for me, I have finally bitten the bullet and bought some Air New Zealand shares. I bought 930 @ 1.67 a piece (plus brokerage fees). I thought this was an absolute bargain…

 

Air New Zealand Details – Why Did I Buy?

The dividend yield was extremely high (over 10%) which I knew was normal for this airline as they pay out a high percentage of profits. This is only a medium term hold for me. I want to make a certain percentage (20%) and then take my original stake back, effectively giving me 20% “free” shares in the company. With these 20% of shares I will hold on my original stake I will keep them for a long term view, for the high dividend.

Here are some examples of pros and cons when dealing with an airline stock.

Pros:

  • High Dividend Yield
  • Low Price to Earnings Ratio
  • Quick Small Time Growth

Cons:

  • Price Volatility
  • Oil Price Dependent
  • Low Long Term Growth
  • No Franking Credits

Overall, I believe that Air New Zealand is a great share to own, especially at the price I was handed it. It has limited growth, but pays a healthy dividend yield which should maintain its levels depending on oil price. If oil price remains the same for 5+ years I will be very happy. What happens when oil price blows out to $100 a barrel again. It would be a sell from me then.

Please discuss below if you have had any dealings with the company or their shares, I would love to hear your thoughts.

6 thoughts on “My First Purchase – [ASX:AIZ] – Air New Zealand

  1. Dividend Diplomats

    Congrats on the buy BHL! That is definitely a high dividend yield. Just o of curiosity, what is the payout ratio for the company? We typically use a threshold of 60% on our website and that helps identify companies that are creeping towards paying an unsustainable dividend.

    Bert

    Reply
    1. Buy - Hold - Long Post author

      Thanks, appreciate it! Typically AIZ payouts are less than 50% of profits, however, last year there was a special dividend because their profit was the highest one to date. This year is also looking good, although, not as high as last year. AIZ provide monthly updates on flight sales etc and they are typically on-par or only slightly less than last year, leading me to think that this Financial Year will be a great one. Thanks, Caleb.

      Reply
    1. Buy - Hold - Long Post author

      Hi Evan. They had a high div yield with a typical payout of only 50% of net profit. It was well undervalued by Morningstar and it’s also a solid blue chip. A little over 50% of the company is owned by the New Zealand government, so I doubt this company is going broke any time soon. Cheers.

      Reply
  2. Mr. All Things Money

    Congrats on buying your first shares. I have never held a stock with 10% yield. My cutoff yield is around 5% for common stocks and around 7% for REITs. Anything above those yields are normally too risky. In addition to the earnings payout ratio, you should also look at Free-Cash-Flow payout ratio as most companies would pay their dividends out of FCF.

    Reply
    1. Buy - Hold - Long Post author

      Thanks for the heads up. I am still new to this so I am currently learning, I will take what you have said on board and look for something similar. All the best.

      Reply

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