Sydney Airport announces major infrastructure investment: Should you buy?

The gateway to the lucky country also known as Sydney Airport Limited (ASX: SYD) today announced some major investment initiatives to improve capacity and facilities over the next five years.

The airport is to invest $1.2 billion on new projects including a new road network around Terminal 1 to make it easier for everyone to travel to and from the airport by car or public transport.

Additionally the state and federal governments have committed to a five-year $282 million investment program in roads around the airport to complement the airport’s own works.

Sydney Airport is just the kind of business income-focused investors should look to thanks to its monopoly like power and defensive revenue streams.

The airport also has several tailwinds supporting its future including the growth in tourism from Asian countries such as China, the popularity of low-cost domestic travel and significant pricing power. For example as a monopoly the airport can continuously raise parking and other service charges safe in the knowledge that users have little alternative other than to pay up.

At $4.29 the airport yields a term-deposit thrashing 5.36%, although it does trade on a sky-high valuation at 32.5x analysts’ estimates for 2015’s earnings per share.

There's no doubt the airport offers a nice yield, but it's not fully franked and the stock looks fully valued for now! If you're looking for a good income stock on a great valuation it may be worth considering a high-income stock that might be about to take off! If you're interested in reading all about it just enter your email and we'll send you the details.

Motley Fool contributor Tom Richardson owns shares in Sydney Airport. You can find him on Twitter @tommyr345

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.