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Copa Holdings: Latin American Potential

02/16/2015 7:00 am EST


Tim Plaehn

Investment Research Analyst, Investors Alley

With the drop in the price of crude oil, the airlines are one sector that should see profits improve dramatically, observes Tim Plaehn, editor of 30 Day Dividends.

Copa Holdings S.A. (CPA) is a nicely profitable Latin American airline company that should produce both higher dividends and a higher share price as lower fuel costs boost 2015 bottom line results.

Copa Holdings is the parent company for Panama-based Copa Airlines and Copa Columbia. The company owns about 100 aircraft consisting primarily of Boeing 737 Next Generation aircraft and a smaller number of Embraer 190 aircraft used for the Copa Columbia routes.

The airline provides an extensive list of flights to the major destinations in Central America, the United States, and the Caribbean.

Copa flies into the North American cities of Los Angeles, Miami, Orlando, New York, Boston, Chicago, Las Vegas, Montreal, and Toronto. In total, Copa provides service to 69 cities up and down the Americas.

Through its almost ten-year history as a public company, Copa management has worked toward the dual focus of steady capacity growth and low cost operations.

Both goals have been facilitated by the employment of a single aircraft type for international routes and using Panama's Tocumen International Airport as the company's major hub. In addition, Panama is a low tax jurisdiction, allowing more gross profit fall to the bottom line.

Copa Holdings has been a consistently profitable airline holding company with net income, net income per share, and dividends paid all increasing steadily.

In mid-2013, Copa switched from annual to quarterly dividend payments. That move puts this airline stock into the 30 Day Dividends prospects list.

From 2013 to 2014, the dividend rate was increased by 31%. The company has the potential to grow future dividends by 10% to 15% per year.

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