Is it time to buy Sydney Airport Holdings Pty Ltd (ASX: SYD) at the current share price for income?
Just before the election the Sydney Airport share price hit an all-time high with income investors fearing the loss of their franking credit refunds from companies.
So, it might be no surprise that the Sydney Airport share price has fallen 7% in just over two weeks with that franking credit change no longer happening.
You may be wondering why it hasn't fallen even more in that time. Well, don't forget that nearly everyone is predicting that the Reserve Bank of Australia is going to cut interest rates this year, perhaps as soon as next month. Indeed, Westpac Banking Corp (ASX: WBC) economists think there could be three rate cuts by the end of the year.
Sydney Airport seems like a solid income option compared to term deposits these days. At the moment, Sydney Airport offers an income yield of 5.2%.
However, domestic passenger numbers continue to fall, which makes me question whether Sydney Airport's strong run is going to come to a halt. In April 2019 there was a 1.3% fall in the number of domestic passengers travelling through the airport. In the year to date to April 2019, domestic passengers were down 1.8% and total passengers were down 0.7%.
However, international passengers may be the saving factor. In April 2019 international passengers rose by 2.5%, although this was boosted by the timing of Easter. In the month, USA passengers increased by 13.2% and Philippines passengers went up by 12.1%. Indian passengers increased by 6% and Japanese passengers increased by 7.4%.
Foolish takeaway
Sydney Airport might be a decent option for income, but at the current share price I don't think there is much room for sustainable capital growth over the medium-term.
