ii view: Airbus improves dividend promise

Business update

ii round-up:

Airbus SE (EURONEXT:AIR) today reaffirmed a commitment to future profitable growth as the plane maker underlined its confidence in the outlook by increasing the upper range of its dividend payout target.

Following on from orders of 132 new aircraft at the start of the Paris Air Show, the Amsterdam headquartered company is now targeting a dividend payout ratio of up to 50%, compared with 30-40% previously. That’s the proportion of profits distributed to shareholders. 

Shares in the CAC 40 constituent rose 2% in European trading and are up over 130% in the last five years. The CAC 40 index is up just over 50% during that time. Incident and strike hit Boeing Co (NYSE:BA) is up by just 6%.

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Airbus makes commercial passenger planes such as its popular A320 series used by airlines like easyJet (LSE:EZJ) and British Airways owner International Consolidated Airlines Group SA (LSE:IAG), along with military and space related equipment and helicopters.

The aerospace group, which operates assembly plants in France, Germany, Spain, and the UK, reiterated full-year 2025 hopes for adjusted profit of around €7 billion versus €5.4 billion in 2024.

Airbus also reaffirmed a cash conversion target of around 1 over a five-year period, a metric that tracks how effectively it turns profit into free cash.

Paris Air Show orders so far include 25 planes for Saudia Arabia’s Riyadh Air, 27 aircraft for Polish airline LOT and 40 planes for Japanese airline ANA. 

Airbus continues to target commercial aircraft deliveries of 820 in 2025 compared with 2024’s 766 units. 

The group’s first-half results are scheduled for 30 July. 

ii view:

Airbus employs over 150,000 people largely across Europe. Group focuses currently include increasing its commercial aircraft ability, leading the development of sustainable aerospace and continuing to manage the transformation of its defence and space businesses. Geographically, Europe accounted for most revenues during 2024 at 40%. That was followed by Asia Pacific at 26%, North America 24%, the Middle East almost 5% and the rest of the world the balance. 

For investors, US trade tariffs and how they might impact on exports to the US cannot be overlooked. Supply chain issues initially suffered during the pandemic and now likely hindered by raised global geopolitical tensions, continue to impact production. Costs for businesses generally remain elevated, while skilled worker shortages persist. 

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To the upside, the group’s order book of 8,726 units as of the late March was up 1.2% year over year. Airbus recently raised its forecast for aircraft demand over the next 20 years by 2%, forecasting industry deliveries of 43,420 commercial aircraft between 2025 and 2044. Action to transform the Space and Defence business has largely been taken, while a forecast dividend yield of around 1.6% compares to no payment at Boeing currently.

In all, and while exposure to the volatile airline industry should never be forgotten, the group’s position as one of only two global commercial aircraft makers continues to justify its place in many diversified long-term investor portfolios.   

Positives: 

• A duopoly passenger plane supplier
• Diversity of product and geographical region

Negatives:

• Raised global geopolitical tensions
• Concerns for aviation’s impact on climate change

The average rating of stock market analysts:

Buy