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Published: November 12, 2009
Most people think competition is good, and it usually is -- for
consumers.
For established companies, however, the story is different.
Companies that must face competition -- which is very nearly all
of them -- must constantly worry about the quality of their
goods or services, changes in consumer preferences, price, and a
host of other factors.
Companies that have the rare benefit of being the only
participant in their market, on the other hand, can just sit
back and collect the cash. These companies are still aware of
quality, price and consumer feedback, of course, but in the
absence of any competitive threat the impetus to respond to
those forces is far less pressing. The money rolls in
regardless.
Investors can profit today from several companies that do just
that.
One that stands out: Grupo Aeroportuario del Sureste (NYSE:
ASR).
This company, whose name translates to "Airport Group of the
Southeast," operates nine airports in southeastern Mexico. With
no competition in the region, the company has a legal monopoly
on air traffic. Its business model is simple but elegant: A
plane lands at one of its airports, it gets paid.
Investors need not fear any antitrust issues. The Mexican
government is perfectly happy with the situation. In fact, Grupo
Aeroportuario del Sureste is licensed by the Mexican government
to operate its airports under a 50-year contract that runs from
1998 through 2048. For those of you keeping score at home, that
leaves us with at least 39 more years of dividend payments.
ASR pays dividends once a year. The most recent payment, in May,
was $4.6936 a share, which gives the shares a first-class 10.5%
yield at today's prices. The payment has grown +737.7% during
the past five years, or about +53.0% if annually compounded.
Grupo Aeroportuario del Sureste not only makes money by charging
fees to airlines, it also charges passengers for using its
facilities. The more traffic that goes through its airports, the
more money it makes. These airline and passenger fees account
for about three-quarters of the company's income. The rest comes
from rent paid by retailers and parking-lot operators.
During the past three calendar years -- through 2008 --
revenue has increased +41.5%. For the first nine months of 2009,
Grupo Aeroportuario del Sureste's top line has amounted to -1%
less than the comparable year-ago period. On the bottom line,
net earnings nearly doubled from 2006 to 2008. So far this year,
the company has earned a net profit equal to about 75% of what
it made in the same period of 2008.
Natural disasters and government policies are among the risk
factors that can affect results. International travelers make up
about half of the company's passenger traffic, and a hurricane
can severely dampen tourist travel, as Hurricane Wilma did in
2005.
This year's disaster was not a storm but swine flu. The
subsequent government action took a toll on results. In June,
safety concerns led the Mexican government to suspend
air-traffic operations at one of Grupo Aeroportuario del
Sureste's airports, which represented 5% of the company's
passenger traffic. The government gave 60 days for the problem
to be corrected, which dampened revenue.
Despite this, the company should benefit from steady, long-term
growth in air traffic. The company is implementing a plan to
upgrade its airports to handle more international traffic in the
years ahead. The company has been busy investing in airport
upgrades, including a new third terminal and a second runway at
its Cancun facility, which was recently completed.
Grupo Aeroportuario del Sureste is perfectly positioned for
stable cash flow and dividend payouts. With no debt, $3.09 in
cash per share and no competition, the company should continue
generating solid returns. Its 10.5% yield is a perfect way for
investors to invest in a monopoly of their own.
-- Anthony Haddad
Staff Writer
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