Is the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price a buy? It's worth considering.
The Sydney Airport share price has fallen by 6% over the past six months. When a share price falls it can make a business more attractive if the company isn't deteriorating.
Sydney Airport has suffered from rising interest rates because it was seen as a bond proxy, meaning investors chose it as a higher-yielding option but it was also defensive, like a bond. However rising interest rates reduces the value of defensive assets like Sydney Airport because investors can get a higher risk-free return from US government bonds.
In recent months Sydney Airport has also been reporting lower domestic passengers. In December 2018 it said total passengers fell by 0.1% compared to December 2017, with domestic passengers declining by 2.6%.
In November 2018 domestic passengers declined by 1.1% and in September 2018 domestic passengers dropped by 0.5%.
Last month Sydney Airport blamed bad weather for some of the passenger declines, but it doesn't seem like a good trend. The worsening Sydney house prices and tough household budget position may be making some people delay their holiday plans.
International passengers now seem to be the key for near-term profit growth. In December 2018 Chinese passengers grew by 4.2%, Kiwi passengers grew by 4.4%, USA passengers grew by 13.1%, Indian passengers grew by 9.8% and Japanese passengers grew by 10.7%.
Foolish takeaway
Sydney Airport is trading with a trailing income yield of 5.7% is fairly attractive, but I've always said I would be more attracted to it when the yield is above 6%. With total passenger growth becoming sluggish I don't think the tourism tailwind is blowing strongly right now, so I would only be personally interested if the share price was below $6.
