Sydney Airport announces major infrastructure investment: Should...

Sydney Airport announces major infrastructure investment: Should you buy?

By Tom Richardson - October 3, 2014 | More on: SYD

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The gateway to the lucky country also known as Sydney Airport Limited (ASX: SYD) today announced some major investment initiatives to improve capacity and facilities over the next five years.
The airport is to invest $1.2 billion on new projects including a new road network around Terminal 1 to make it easier for everyone to travel to and from the airport by car or public transport.
Additionally the state and federal governments have committed to a five-year $282 million investment program in roads around the airport to complement the airport’s own works.
Sydney Airport is just the kind of business income-focused investors should look to thanks to its monopoly like power and defensive revenue streams.
The airport also has several tailwinds supporting its future including the growth in tourism from Asian countries such as China, the popularity of low-cost domestic travel and significant pricing power. For example as a monopoly the airport can continuously raise parking and other service charges safe in the knowledge that users have little alternative other than to pay up.
At $4.29 the airport yields a term-deposit thrashing 5.36%, although it does trade on a sky-high valuation at 32.5x analysts’ estimates for 2015’s earnings per share.
There's no doubt the airport offers a nice yield, but it's not fully franked and the stock looks fully valued for now! If you're looking for a good income stock on a great valuation it may be worth considering a high-income stock that might be about to take off! If you're interested in reading all about it just enter your email and we'll send you the details.