Is the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price a buy for the dividend yield?
Sydney Airport has been known as a quality dividend share for a while.
It ticks quite a few boxes. As an airport it's a unique asset that can't be duplicated, even the scheduled second Sydney Airport isn't due for completion for a long time, so Sydney Airport has an impressive economic moat.
The tourism tailwind is a story that has been heralded for a number of years, Asians love visiting (and buying property) in Australia. The Asian tourism tailwind continues to be true.
The airport operator has utilised higher passenger fees, retail, car parking and so on to grow its earnings. Sydney Airport has increased its income payment to shareholders from $0.21 per share in 2012 to $0.39 per share in FY19, which is a very healthy amount of growth.
However, there are clouds on the horizon for Sydney Airport. Quite a few of its recent monthly passenger reports have shown a decline in passengers, particularly domestic passengers. For example in February 2019 domestic passengers fell 2.7%, causing total passengers to fall 1.5%.
The distribution from Sydney Airport to securityholders can only grow if the net operating profit is growing, which is unlikely if passenger numbers continue to drop.
Foolish takeaway
A rising Sydney population and more tourists should help Sydney Airport over the longer-term, but the current FY19 distribution yield of 5.2% isn't attractive enough for me to want to buy with falling passengers. I think there are better dividend shares on offer.
