Is the Sydney Airport Holdings Ltd share price in the buy zone?

So far this year the Sydney Airport Holdings Ltd (ASX: SYD) share price has gained a solid 6.5% compared to a 2.3% gain by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

A strong full-year result in February is largely behind the share price movement. The company recently reported a 10.3% rise in operating profit, thanks largely to a solid increase in passengers through its terminals.

The good news for shareholders is that the passenger numbers have remained strong in FY 2017.

In February Sydney Airport welcomed 1,222,000 international passengers, up 4.2% on the prior corresponding period. This is especially impressive considering that last February was a leap year and included the Lunar New Year.

Because of the impact of the leap year, domestic passengers fell 2.5% to 2,062,000. Though it is worth noting that the daily average increased 1% to approximately 73,643 international passengers.

Should you invest?

With many major airlines increasing capacity into and out of Sydney Airport, I have no doubt that the company is positioned well for another solid year.

However, at 45x trailing earnings its shares are certainly on the expensive side. While Sydney Airport is likely to be a big winner from the tourism boom, I feel at the current share price there is limited upside potential.

Furthermore, as bond yields rise in the United States, I am concerned that bond proxies like Sydney Airport and Transurban Group (ASX: TCL) could fall out of favour with investors.

For this reason I would suggest investors look to gain exposure to the tourism boom through investments in Event Hospitality and Entertainment Ltd (ASX: EVT) or Apollo Tourism & Leisure Ltd (ASX: ATL) instead.

While Sydney Airport's dividend is good, this dividend share's yield is even better. In my opinion it is the best on the market right now and not to be missed.

A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool contributor James Mickleboro has no position in any 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 Bruce Jackson.

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