The Facts (as of June 2, 2011)

Share price: $5.13. Book value per share: $1.29. Market cap: $625.8 million (medium). Distribution: $0.15 per quarter or $0.60 per year. Current yield: 11.7%. P/E: 5.0. Debt/equity ratio: 0.54. Payout ratio around 60%.

The Story

Chorus Aviation Inc., formerly Jazz Air Income Fund, is a Canada-based holding company that holds Jazz Aviation LP (Jazz). Jazz provides airline service throughout Canada and also offers service to and from certain destinations in the United States. Jazz operates scheduled passenger service on behalf of Air Canada with over 790 departures per weekday to over 85 destinations in Canada and in the United States with a fleet of 128 aircraft. Jazz also operates Boeing 757-200 aircraft on behalf of Thomas Cook Canada for the winter seasons to various destinations in the Caribbean, Mexico and Central America.

Pros

Almost all Jazz seats are purchased in a block by Air Canada with guaranteed minimums. Air Canada has begun purchasing from other regional airlines to achieve competitive pricing, but the company maintains their guaranteed cash flow. The P/E is very low, if earnings can be maintained. The payout ratio is low, so the dividend should be maintained despite any economic hiccups. The yield is extremely attractive.

Cons

It’s an airline, and Warren Buffet famously said that from a purely economic point of view, the Wright brothers should have been shot. Fuel price volatility could impact profits and unionized workers introduce more uncertainty.

Impression

This company seems like a reasonable investment for someone looking for current income.Ā  But it would also be an investment to keep a close eye on, knowing that their fortunes could change quite quickly.

Chorus Aviation CHR.B

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