Should you buy Sydney Airport?

Sydney Airport plans to double capacity by 2033 — will that also double returns for shareholders?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australia's major international gateway and its busiest airports with over 37 million passengers a year, Sydney Airport (ASX: SYD) has released its 'Master Plan' for the next 20 years.

It is quite a read! The monopoly provider in NSW for major airlines plans to double capacity to 74.3 million passengers per year by 2033. Having already spent $2 billion since 2002 on improvements to passenger facilities and capacity, the Master Plan aims to undertake "significant investments to improve traffic flow in and around the passenger terminal precincts". Amazingly the Master Plan assumes no change to curfews, no change in aircraft movement cap, no change to noise sharing arrangements, no change to access arrangements for regional airlines and no new flight paths or runways.

The target of doubling capacity seems to be based primarily on improving ground transport solutions and other efficiencies and not undertaking any major capital works to runways. It goes to show the incredible leverage this asset has, and must also make taxpayers wonder about the ongoing call for a second airport. The fact that the Master Plan outlines a plan to double the capacity while utilising essentially the same asset should get investors excited.

That monopolies can make great investments and provide above normal profits to owners is obvious. However the opportunity to own monopolies is few and far between. For the few that are listed on the ASX, the gains to shareholders have been tremendous. Over the past five years, while the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has declined nearly 13%, Sydney Airports has flown up 22.4%. Over the same time period, toll road operators Transurban Group (ASX: TCL) and Macquarie Atlas Roads (ASX: MQA) have seen their share prices driven 29% and 101% higher respectively.

tmchart

Source: Google Finance

Foolish takeaway

Because everyone knows monopolies make great investments, they nearly always trade at lofty prices but occasionally alert investors get the opportunity to buy them cheaply. So stay alert!

On the lookout for high yielding ASX shares? Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading


Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »