CAE eyes reinstating dividend

CAE Inc. took the full force of the pandemic but rebounded strongly with reopening. As conditions have improved, the big question for investors is whether it will restore its dividend.

CAE suspended its 11-cent quarterly dividend in 2020 and used the cash to make strategic investments that laid the groundwork for future gains. The company says it will make a dividend decision in the first half of this year.

Here’s an update:

Background: CAE (TSX, NYSE: CAE) is the world’s largest maker of flight simulators used to train civilian and military pilots. Commercial aviation is about 55% of revenue and military and other about 45%. About 90% of revenues come from outside Canada, with a large portion from emerging markets.

Performance: CAE’s shares rose 9% in 2023. At their current price of C$28.03 they are down 1.9% year-to-date.

Recent developments: CAE has roughly 70% of the global market for military and civilian simulators. Its most recent quarter showed it continues to benefit from a post-covid rebound in business and personal travel and solid demand in its defence segment. This enabled the company to report double-digit growth in revenue and net income.

For the three months ended Sept.30, net income was $58.4 million ($0.18 per share). That was 31% higher than a year earlier. Revenue rose 10% to $1.09 billion. The backlog increased to a record $11.8 billion, 11% higher than the year earlier.

In a statement, CEO Marc Parent said the civilian side is benefiting from rising demand for air travel and pilot training on new types of aircraft. He said the defence sector is in the early stages of an extended up-cycle, driven by greater commitments by governments to modernization and readiness in the context of geopolitical events.

Divestiture: In late October, CAE announced the sale of its medical simulation business for $311 million to privately held Madison Industries, which is based in Chicago. The medical training segment was launched in 2009 and focuses on training doctors, nurses, and other medical professionals via patient simulators. The unit accounts for about 4% of revenue, and the deal is expected to close within six months.

Dividend: CAE suspended its 11-cent-a-share quarterly dividend in March 2020. Chief Financial Officer Sonya Branco said in a conference call that CAE will reevaluate its dividend position following the closing of the sale to Madison. 

This article appeared in the Internet Wealth Builder on Dec. 11, 2023 and has been updated.  For information on how to reprint this article please view this page.