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of Light jet (LSE: EZJ) share price continues to decline. The threat of high inflation continues to weigh down the budget airline. As I type, it’s down 43% since early 2022.
Yet many investors believe the former FTSE 100 The company is a great bargain to buy now. Should I buy EasyJet shares as the travel sector continues to evolve? And should I buy the business for next year’s dividend?
Is it divided to return?
Yes, you read that right. It is true that EasyJet has not been a reliable dividend earner over the years. But city brokers think all that is about to change.
At the time of the outbreak, the low-cost airline was cutting its annual dividend. In the financial year to September 2019, it cut its full-year premium to 43.9p per share from 58.6p as higher fuel and currency costs hit profits.
The business then eliminated shareholder payments entirely in fiscal 2020. And it is not expected to pay a dividend this year either. But EasyJet is expected to turn things around again from October with an award of 4.5p per award for the new year.
Fast growing market
With EasyJet’s share price at 339p per share, the dividend is set at a comfortable-if-unusual 1.3 per cent. To put this into perspective, the FTSE 100 average sits at just under 4%.
But that alone isn’t enough to rule out EasyJet as a future dividend stock. As the civil aviation sector continues to improve and profits rebound, shareholder payouts can grow significantly. This can make it a great passive income pool to buy the airline from.
There is no disputing that the budget airline sector will see tremendous growth in the long term. And as one of the industry’s leading players, EasyJet may be one of the best-placed to ride this opportunity.
Analysts at Allied Market Research, for example, think the global low-cost airline sector will grow to $440.5 billion by 2030. This represents a compound annual growth rate of 10.4% over the next eight years.
High risk stock
That said, EasyJet isn’t a future share-buy star that I’m ready to buy right now.
I am beyond impressed with the company’s ability to reinvent the travel industry. It made a pre-tax loss of £114m for the three months to June, its latest financial figures show. Flight activity has improved again, but staffing issues have worsened (about 10,000 flights had to be canceled during the summer).
Shortages of cabin and ground crews have been a major concern for airlines, including EasyJet. And it’s a problem that’s likely to continue because of post-Brexit immigration laws. So is the prospect of another hike in fuel prices, which could push fuel prices higher.
There is also a risk that ticket sales could dry up again as the cost of living affects consumer spending. And as competition in this fast-growing industry intensifies, EasyJet’s revenues and margins could suffer.