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Sydney Airport poised to enter 2020 at a record high

Brendon Lau
Corporate travel jet flying into sunset

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is on track to join an elite group of ASX shares to end the year on a high.

The SYD share price jumped 1.3% to $9.20 during lunch time trade as management held its annual investor day. If it closes at this level, it will rival the record high it set last month.

Other stocks that are trading near or at record highs include well-loved names like the CSL Limited (ASX: CSL) share price, the Aristocrat Leisure Limited (ASX: ALL) share price and the James Hardie Industries plc (ASX: JHX) share price.

King of infrastructure

Even among its peers of infrastructure operators, Sydney Airport shares are flying high. Toll road group Transurban Group (ASX: TCL) is up a respectable 30% in 2019, but that pales in comparison to the 38% gain by Sydney Airport.

Meanwhile, pipeline owner APA Group (ASX: APA) jumped 26% while poles and wires company Spark Infrastructure Group (ASX: SKI) fell 5% over the same period. The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is sitting on a gain of 20%.

Sydney Airport’s outperformance comes even as management didn’t reveal anything particularly new or exciting. But it’s perhaps the steady-as-she-goes message that resonated best with supporters as we head into what is probably going to be a turbulent 2020 for share markets.

Investors are happy to pay a premium for certainty during tumultuous times – and many are willing to bet that the solid performance by our nation’s largest airport is unlikely to change after the new year.

Squeezing more from passengers

Meanwhile, the airport is looking at ways to squeeze more money out of travellers flowing through its terminals. This includes using data analytics to better understand consumer behaviour and optimising the retail opportunities.

Not even a sputtering Chinese economy is enough to put investors offside. Travellers from China make up the biggest segment of passengers and their love for shopping have given the airport (and the wider economy) a much welcomed boost.

There were 1.2 million Chinese residents using Sydney Airport in the 12 months to June 2019 with the group making up 7% of total inbound tourists.

China slowdown not a worry

The slowing Chinese economy could put a crimp on this growth (and we are already seeing some early signs of this in the monthly passenger data), but investors aren’t too worried as many believe this will be offset by growth of visitors from other regions.

The falling Australian dollar is making a holiday Down Under that much more attractive. Visitors from the US are second behind China at 6% of the total and Indian visitors are another fast growing group, although they are coming off a low base at 2% of the total.

Foolish takeaway

But with Sydney Airport’s dividend yield sitting at around 4.5%, one might think there isn’t much room left for the stock to climb before the yield becomes unattractive relative to other income stocks.

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The post Sydney Airport poised to enter 2020 at a record high appeared first on Motley Fool Australia.

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Brendon Lau owns shares of Aristocrat Leisure Ltd. and James Hardie Industries plc. Connect with him on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited and Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019