In my opinion, WAM Research Limited (ASX: WAX) is a better dividend share than Sydney Airport Holdings Pty Ltd (ASX: SYD).
Both have them have very attractive yields. WAM Research has a grossed-up dividend yield of 9.3% compared to Sydney Airport's yield of 5.7%. Already that's a point to WAM Research.
WAM Research is a listed investment company (LIC) that is operated by the high-performing team at Wilson Asset Management. It focuses on the underlying quality of the small and medium caps it hunts for.
Sydney Airport Holdings operates the main airport in Sydney, Kingsford Smith.
Both businesses have delivered pleasing total returns for shareholders and a growing income payment each year.
However, the growth of passenger numbers through Sydney Airport is slowing compared to recent years. Trees don't grow to the sky and we can't expect passenger numbers to keep going up every month either.
A slowing growth rate suggests investors shouldn't be willing to pay such a high price. Rising interest rates are another factor that is hurting the Sydney Airport share price.
The benefit of a LIC is that it can adjust its holdings to suit the current investment environment. For example, WAM Research has increased its cash position to 42% at the end of November 2018. It can also move its money into defensive shares where the earnings are unlikely to be hurt in a recession.
Sydney Airport has increased its distribution each year since 2013 and WAM Research has increased its dividend each year since 2010.
Foolish takeaway
Sydney Airport is currently trading at 34x FY19's estimated earnings. I think its income is safer than some retail and resource shares, but it's expensive for the yield on offer in my opinion. Although WAM Research is also expensive compared to its underlying assets, I think it offers more flexibility for shareholders.
