Sure thing!
So, here’s the deal — Before you dive deep into the latest Safety Net, there’s something you should probably know about this week’s schedule hiccup. We’re all taking a little breather on Friday. Yes, the whole Oxford Club office is shutting down for the Fourth of July festivities. Guess what that means? Anthony Summers’ Value Meter is switching places, popping up on your screens on Saturday instead. Sorry, no fresh Friday spread from Wealthy Retirement this week.
Anyway, hope you have a chill yet totally unforgettable Independence Day with your fam! Go make some memories (just don’t forget SPF if you’re heading outdoors). – James Ogletree, Senior Managing Editor, signing off.
Here’s a weird thing. Ever got a song stuck in your head that just won’t quit? For me, it’s Barry Manilow’s “Copacabana” from the 70s. Totally random, I know. But hey, there’s something catchy about “At the Copa, they fell in love.” Come to think of it, dividend investors seem to have a similar infatuation with Copa Holdings (NYSE: CPA). Why? Just a juicy 6% yield, that’s all.
But let’s not get ahead of ourselves. Will this love story end in bliss, or are we setting up for heartbreak? Let’s dig in.
Copa Holdings is like two peas in a pod, owning airlines out of Panama and Colombia. Been around the block since 1947 (can you even imagine?). They’re tossing out a $1.61 quarterly dividend right now, which lands them a 5.9% yield. Nice on paper, right? But here’s where the drama kicks in.
Their cash flow is all over the place, like a rollercoaster I didn’t sign up for. Fun fact: This year’s free cash flow is predicted to dip below 2021 levels, which were already in the pandemic weeds. How wild is that?
Falling cash flow isn’t what Safety Net dreams about at night. Last go-round, Copa shelled out $269M in dividends on $371M free cash flow — a comfy 73% payout ratio. No sweat. But this year? Free cash flow could nosedive to $114M while they’re still committed to dolling out $295M in dividends. That’s a rocket ride to 259% payout ratio. Gulp.
The swings don’t stop there. Copa’s slashed dividends thrice over a decade. 2016 saw it drop from $0.84 to $0.51. In 2019, from $0.87 to $0.65. And they pulled the plug altogether for a chunk of 2020. Ouch.
Management treats dividends like peanuts on flights—disposable. With cash flow dropping, brace yourselves for another cut unless they tap into that $1.3B stash or sail into debt. Yeah, not holding my breath for sainthood here.
Got another stock you’d like under the Safety Net spotlight? Hit me up with the ticker in the comments. Or, feel like sleuthing first? Search around the Wealthy Retirement page for past stock chatter, just tap “Search” up top and hit “Enter.”
Quick heads-up: Safety Net’s all about individual stocks, so no funds analysis here folks.
