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International Consolidated Airlines Group
British Airways owner International Consolidated Airlines Group (LSE: IAG) is one of the London market’s greatest success stories.
Eight years ago, the company was struggling to turn a profit. However, under the stewardship of former pilot Willie Walsh, the group has soared. It is now one of the largest airline holding companies in the world with a market capitalisation of £12.7bn. For 2019, the organisation is on track to report a net profit of £2.3bn.
According to aerospace group Airbus, air traffic will grow 4.3% annually between 2019 and 2028, and IAG is well-positioned to grow in line with this market. This suggests the company can continue to produce returns for investors for many decades to come.
Right now, shares in the airline group look cheap as well. The stock is dealing at a price-to-earnings (P/E) ratio of 6.9, which suggests the shares offer a wide margin of safety at current prices.
There’s also a dividend yield of 4.2% for income seekers. As the payout is covered 3.3 times by earnings per share, it looks as if there’s plenty of room for the distribution to grow in line with earnings for the foreseeable future.
A rising number of air travellers should also help low-cost airline easyJet (LSE: EZJ). Recent trading updates show the number of passengers on its planes is still rising and this growth shows no signs of slowing.
Total group revenue for the quarter ending 31 December increased by 9.9% to £1.4bn. Meanwhile, total passenger numbers rose 2.8% to 22.2m.
Load factor, a measure of how full the company’s planes are, grew by 1.6% to 91.3% despite an increase in capacity (new aircraft) of 1% to 24.3m.
These numbers suggest passengers are continuing to flock to easyJet’s offering and the group isn’t struggling to fill the new planes it’s ordering.
Management is planning to expand capacity by a further 3% this year. Growth should also receive a boost from the group’s new business, easyJet holidays.
Launched last year, the new business will breakeven in September 2020, according to management. easyJet has been able to use its international footprint and scale to offer customers good quality holidays at a low cost.
easyJet has come a long way since its IPO in 2000. Considering all of the above, it looks as if the company’s growth will continue for the next two decades as well.
A P/E of 15.3 doesn’t look too expensive for this growth stock. Meanwhile, a dividend yield of 3.3% only adds to the appeal. As such, now could be the time to snap up a share in this income and growth champion for the long haul.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.