We Wouldn't Be Too Quick To Buy Air New Zealand Limited (NZSE:AIR) Before It Goes Ex-Dividend

As investors, we're always on the lookout for the next big opportunity. But sometimes, we need to pump the brakes and take a closer look before jumping in. That's the case with Air New Zealand Limited (NZSE:AIR), which is set to go ex-dividend on March 6, 2025. Let's dive into the details and see if it's worth our while.

First things first, Air New Zealand has an annual dividend of $0.025 per share, with a yield of 4.00%. That's a decent boost to shareholder returns, but it's not the only factor we should consider. The company's dividend policy is to pay an ordinary dividend equal to between 40% to 70% of underlying net profit after tax, subject to the Board's due consideration of various factors. This pay-out ratio range is intended to provide sufficient flexibility for dividends to be maintained through cycles in economic conditions and Air New Zealand's investment profile.

However, Air New Zealand's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from NZ$0.095 total annually to NZ$0.03. This works out to a decline of approximately 68% over that time. This volatility is a red flag for investors, as it indicates that the company may struggle to maintain its dividend payments in the future.

Another concern is the company's recent dividend cut. Air New Zealand is paying out less in dividends than last year, with the dividend yield falling from 4.7% to 4.0%. This cut suggests that the company may be facing financial challenges or prioritizing other uses for its cash. The Board's absolute discretion to change its intention, to increase or reduce dividends, or not authorise any dividends at all on Air New Zealand shares also adds an element of uncertainty.

So, should you buy Air New Zealand Limited (NZSE:AIR) before it goes ex-dividend? While the dividend yield is still attractive, the company's dividend history, recent cut, and Board's discretion make it a risky choice. As investors, we should always be cautious when a company's dividend is volatile or has been cut recently. It's essential to do thorough research and consider all factors before making an investment decision.

In conclusion, while Air New Zealand Limited (NZSE:AIR) may seem like an attractive investment opportunity with its high dividend yield, the risks associated with its dividend history and recent cut make it a less-than-ideal choice for investors. It's always best to be cautious and do your due diligence before investing in any company.