Why the Sydney Airport Holdings Ltd share price is taking off again

The Sydney Airport Holdings Ltd (ASX: SYD) share price is 0.8% higher today at $6.91 after it reported international passenger growth was up 5.7% for the quarter ending March 31 2017.

Total passenger growth compared to the prior corresponding was up just 2.2%, although the exclusion of the busy Easter period in the most recent quarter probably means the total passenger growth is slightly better than the headline numbers.

The Airport’s shares have climbed 15% over the course of 2017 probably as a result of some positive broker ratings and expectations that the U.S. cash rate hiking cycle may not be as aggressive as first believed by markets.

US 10-year treasury yields have been on a gentle downward trajectory over the course of 2017, although I expect their medium-term direction will remain higher which suggests Sydney Airport shares could head lower over the medium term.

In fairness supporting the Airport’s outlook is the growth in inbound tourism especially from fast-growing Asian markets and it is the tailwinds combined with its monopoly status that has helped it lift dividends at impressive rates, with FY 2017 expected to deliver 33.5 cents per security, up 8.1% on the prior year.

The expected payout would place the group on a dividend yield of 4.85% based on today’s share price, which looks insufficient to me to compensate for the risk of investing in a business on a sky-high valuation that is vulnerable to rising benchmark debt rates over the next 24 months.

If I were looking for dividend shares I would prefer those less correlated to debt markets and with more growth potential, such as shoe retailer RCG Corporation Ltd (ASX: RCG), or financial services business Macquarie Group Ltd (ASX: MQG).

5 things every SMSF must do in 2017

Whether you've been running an SMSF for many years, or you've only just established one more recently, the income tax and regulatory environment in which SMSFs operate can be quite convoluted.

We've put together a list of the five most important things that we believe will help you keep your SMSF on the straight-and-narrow now and into the future.

Simply click here to access...

Motley Fool contributor Tom Richardson owns shares in Macquarie. The Motley Fool Australia has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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.

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.