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Why the Sydney Airport share price soared to a new record high yesterday

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price hit $8.92 per share on the ASX yesterday.

The latest share price surge puts the company’s shares into uncharted territory.

Sydney Airport shares have surged 33.68% so far this year and more than doubled in the last 5 years.

So, is there still more growth in the Sydney Airport share price in 2020?

Why the Sydney Airport share price is surging higher

Sydney Airport shares have consistently climbed higher throughout 2019 to their current $8.90 valuation.

It hasn’t all been smooth sailing though, with the company reporting a 90% drop in half-year net profit.

The biggest hit was a one-off $182 million tax bill, which meant its underlying profit climbed 14.8% higher in August.

This makes the Sydney Airport share price gains even more impressive given challenging conditions for itself and Auckland International Airport Ltd (ASX: AIA).

Is now the time to buy?

The stock’s resilience and strong 4.33% dividend yield could potentially make it a strong buy in 2019.

However, I would hesitate to buy, given it is at a 52-week and record-high valuation at the moment.

I like that Sydney is a large-cap with a $20.1 billion market cap but the 53.8x price-to-earnings ratio does make it a little pricey.

I think for the dividend yield on offer it might be better value to buy the likes of BHP Group Ltd (ASX: BHP).

While the BHP share price is a little beaten down, I think this is more short-term volatility than anything else.

With potential resolutions to both Brexit and the US–China trade war in 2020, the BHP share price could be a good tactical buy for a 5.30% dividend yield.

In terms of Sydney Airport, I’d be waiting until the February full-year earnings before diving into the stock.

If the Sydney Airport share price continues to climb higher before then, I’d be sitting tight and waiting for a correction if trading conditions worsen.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. 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 Scott Phillips.

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