The economic crisis of the last year has forced changes in the spending habits of both individuals and corporations. One of the biggest changes is the shift from purchasing transportation equipment to renting and/or leasing it. Certainly in the short run there are significant cost savings to be had from leasing over buying. And while the trend continues, there are a number of niche companies that will benefit greatly. Below we review several transport leasing and rental firms that pay investors substantial dividends and boast impressive fundamentals.

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In the Beginning, Dividends Flew

Genesis Lease Limited (NYSE:GLS) is an Irish company that leases both commercial and non-commercial aircraft to airlines worldwide. The company's shares trade with a P/E of just 3.6 times last year's earnings and pay investors a meaty 9.8% annual dividend. Last quarter, Genesis' profit rose 67%. The rise occurred in part as a result of revenue growth; the repurchase of the company's outstanding debt was also a contributing factor. Recently, Genesis' strong cash position led management to commit to repurchase up to $20 million of its shares over the next 12 months.

Babcock & Brown Air Limited (NYSE:FLY) is, oddly enough, another Irish lessor of commercial jet aircraft. The payout here is 11.1% annually and the shares trade with a P/E of 2.85. Price-to-book is a mere 0.54 and price-to-sales a lowly 0.80. Babcock & Brown shares are up nearly 200% since bottoming in March. The company saw an explosion in profits in the first quarter, $47 million, compared to $11.7 million in the same period a year earlier.

Lease-a-Ship Services

Textainer Group Holdings (NYSE:TGH) is a Bermuda-based owner and lessor of a fleet of marine cargo containers. The shares trade with an earnings multiple of 5.7 and offer an annual yield of 8.7%. The price-to-book ratio for the company is a very reasonable 1.1. Textainer recently added two large assets to its managed container fleet, purchasing rights from Amphibious Container Leasing Limited (Amficon) and Capital Intermodal Limited. With these two moves, TGH added 15% to its carrying capacity.

Aircastle Limited (NYSE:AYR) closes out our quartet of transport lessors. Also in the aircraft leasing business, Aircastle stock yields 5.9% annually and has a P/E of 5.20. The company's shares are up over 150% since March. Aircastle trades at less than half the company's breakup value (price/book is 0.47) and at a price/sales multiple of just 0.93.

The Wrap
There appears to be a solid buy signal flashing on the transport leasing and rental subsector. Both dividend yields and share price ratios confirm the call. As long as the general corporate tendency is to avoid large expenditures, transport lessors are likely to thrive. (To learn more, read Digging Into Book Value.)

Tickers in this Article: GLS, FLY, TGH, AYR

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