It certainly has been a tough year for the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price.
As the operator of the country’s largest airport, the collapse in domestic and international tourism markets because of the pandemic has led to a sharp reduction in passenger numbers.
This has unsurprisingly weighed heavily on the Sydney Airport share price and means it is down a sizeable 41% from its 52-week high.
Is Sydney Airport’s performance improving?
With restrictions starting to ease in some states, this morning Sydney Airport revealed that it has been experiencing a very slight uptick in passenger numbers.
According to Sydney Airport’s traffic update for June, a total of 172,000 passengers passed through its terminals during the month. This was down 94.9% on the prior corresponding period’s ~3.4 million passengers.
This comprised 32,000 international passengers (down 97.6%) and 140,000 domestic passengers (down 93.3%).
Management commented: “While domestic passengers noticeably increased in June when compared with April and May, Sydney Airport expects to continue to see significant reductions in passenger traffic for as long as domestic and international travel restrictions persist.”
Should you invest?
I think Sydney Airport could be a good long term option for income investors, just as long as the recent spike in coronavirus cases in Victoria and pockets of New South Wales doesn’t get out of control.
If things go to plan, I believe domestic travel markets could return to relatively normal levels again in 2021. This could put Sydney Airport in a position to pay a dividend that offers a decent yield at the current level.
I’m now estimating a dividend in the region of 20 cents per share in FY 2021, which represents a 3.6% dividend yield based on the current Sydney Airport share price. After which, I expect its dividend to return to a more normal level of 32 cents per share in FY 2022. This represents a yield of almost 6%.
Overall, I think it could make it well worth being patient with the company and picking up shares with a long term view.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.
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