Is the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price a buy for income?
Since the start of the week the Sydney Airport share price has fallen by 4%, with most of that fall being experienced yesterday after the company reported its February traffic figures.
If you haven't already seen the figures, it didn't make for great reading. Domestic passenger traffic was down 2.7% and international passenger traffic was up 0.4%, leading total passengers to be down by 1.5%.
Sydney Airport explained the reduction of domestic passenger numbers was due to a 1.9% reduction of domestic seat capacity combined with lower load factors. There were also higher cancellation rates. What this boils down to is that there is currently lower domestic demand for air travel.
Asian passengers continue to be the driving force of international passenger growth with South Korean passenger numbers growing by 18.7% in February and Indian passengers growing by 11.9%.
However, other key nationalities like Chinese and British passengers were down 4.6% and 6.3% respectively in February, perhaps partly because of the shift of the Lunar New Year.
A key concern for me about these figures is that many of the individual months over the past six months have shown declines in domestic passenger numbers. Sydney Airport relies on passenger growth to increase its profit. Less passengers means less air fares, less car parking fees and so on.
If the earnings aren't growing then it's unlikely the income Sydney Airport gives to shareholders can grow either, which damages the thesis of it being a good income share.
Foolish takeaway
Sydney Airport is trading with a FY19 yield of 5.4% if the guidance for this year of 39 cents per security is met. This isn't a bad yield, but it can be dangerous chasing a yield if earnings are going to fall.
