The Motley Fool

Here’s why you might want to take a second look at Auckland International Airport Ltd

New Zealand’s biggest airport is undergoing something of a transformation at the moment.

With passenger growth expected to nearly triple in the next 30 years, Auckland International Airport Ltd (ASX: AIA) is planning construction of a second runway alongside various expansions to terminals and other airport facilities.

Two recent announcements concerning foreign carriers China Airlines and Singapore Airlines indicate that more than 115,000 additional seats will be available between Singapore-NZ and Taipei-Brisbane-NZ in future reporting periods.

This will certainly attract extra tourists, and with loads of further growth predicted, investors can expect regular increases in earnings and dividends with the security of knowing that these earnings are driven by macroeconomic factors that won’t vanish overnight.

Broadly speaking, Asian nations are enjoying rapidly increasing levels of material prosperity which will in turn lead to great increases in consumption of a number of products – including tourism – from Australia and New Zealand.

Of course I can’t promise that any of these tourists will want to visit Auckland Airport and its Aussie counterpart Sydney Airport Holdings Ltd (ASX: SYD), but we’re virtually next door and it’s pretty likely.

Sydney Airport is also predicting a rapid increase in its number of passengers by 2033 (from 38 million up to 74 million), and overall it looks to be the better value airport with a higher dividend and less infrastructure spending (no additional runways) required, compared to Auckland.

However Auckland should see greater proportionate earnings growth than Sydney, given that its traffic is expected to triple; although it is difficult to predict how the relationship between the NZD and AUD will impact earnings over a 20-year timeframe.

Regardless, these are two stocks with long, favourable tailwinds, which is why at least one of them made it into my recent list of the best investments to buy and hold forever.

If you’re after companies with similar advantages to these two airport stocks, you should check out The Motley Fool’s free report on our Top Dividend Stock for 2014.

It’s a company I already own, and one that boasts a record of solid past results and has great plans for future expansion.

If you’re interested, simply enter your email address in the link below – it takes less than 30 seconds – and we’ll email it to you , completely FREE!

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.

Related Articles...