Headwinds Threaten Aircastle's Dividend

Aircastle's(AYR Quote) lofty 20% dividend yield looks enticing on first glance. But with global aviation demand weakening and the aircraft financing markets under pressure, the aircraft-leasing company may be forced to cut its dividend this year or next.

Aircastle makes its money by buying planes and leasing them to passenger and freight carriers such as US Airways(LCC Quote) and Sterling Airlines, its two largest customers.

The company's rapid growth in recent years was fueled by an acquisition binge that was financed through cheap long-term debt secured in the asset-backed securities market, which is now virtually shut down. ...