Sydney Airport’s (ASX: SYD, OTC: SYDDF) financial and operating results in the 21st century evidence long-term resilience supported by strong growth in passenger numbers. This traffic growth has been driven to a large degree by Chinese tourism.

Sydney Airport hasn’t suffered the significant economic shocks that many international peers have in recent years. Its total traffic has increased steadily during the period, as opposed to declines for other airports.

Unlike some large peer airports in Europe and US, Sydney Airport’s pricing is subject to a less rigorous regulatory framework, as it negotiates commercial agreements directly with airline customers. There is, however, some revenue risk based on the generally weak financial profiles of most of the airline carriers.

But in recent years Sydney Airport management has taken advantage of favorable market conditions to extend maturities and reduce interest costs on its large debt burden.

It does have a total of AUD1.735 billion coming due over 2014 and 2015. But management has a proven record of successfully managing refinancing well in advance. And the airport has significant undrawn bank facilities, although some of these are expected to be used to fund capital expenditures.

And as of June 30, 2013, there was AUD1.3 billion available in cash and undrawn facilities.

Based on its solid record of growth through a challenging period for the global economy and its strong position in the China-Australia bilateral relationship, we’re adding Sydney Airport to the AE Portfolio Aggressive Holdings.

For the five years from Dec. 5, 2008, through Dec. 6, 2013, Sydney Airport’s Australian Securities Exchange (ASX) listing has generated a total return in US dollar terms of 476.4 percent.

Since 2009 it’s paid a consistent regular annual dividend of AUD0.21 per share, with a special dividend of AUD0.125 per share paid in 2010 and return of capital payment of AUD0.80 per share paid in 2011.

Even after the strong run at current levels Sydney Airport is yielding a solid 5.6 percent.

With a passenger throughput of approximately 36.9 million, it’s Australia’s largest airport.

And it’s quite literally Australia’s primary gateway with China.

Close to 400,000 Chinese residents visited Sydney during fiscal 2013. Chinese passengers are consistently Sydney Airport’s fastest-growing passenger group, with annual growth averaging almost 14 percent over the past four years. It’s now the airport’s second-largest international passenger group, trailing only close neighbor New Zealand.

Four Chinese carriers–China Southern, China Eastern, Air China and Sichuan Airlines–compete on the China-Australia route, offering a combined 19,540 one-way seats per week. The route has been steadily growing and will reach a new capacity record this month when it reaches 25,189, driven largely by China Southern adding 3,491 seats.

Management reported international passenger growth of 3.7 percent over the prior corresponding period during September 2013, driven once again by traffic from Greater China. Passengers from Mainland China grew by 28 percent, from Taiwan by 27 percent and from Hong Kong by 23 percent.

For the first half of 2013 Sydney Airport posted earnings before interest, taxation, depreciation and amortization (EBITDA) of AUD436.9 million, up 6.3 percent compared to AUD411.1 million for the six months ended June 30, 2012.

Revenue for the period was up 6.8 percent to AUD537.9 million, as total passengers grew by 3.0 percent to a first-half record 18.2 million. International passenger growth for the period was 3.6 percent, highlighted by the commencement of Air India service and the first direct flight from India to Sydney in 22 years.

Cash flow available to shareholders slipped by 3.3 percent to AUD235 million due to lower add backs of non-cash financial expenses. Net operating receipts totaled AUD208 million, or AUD0.11 per security, up from AUD199 million, or AUD0.11 per security, a year ago.

Sydney Airport, in line with its policy to pay 100 percent of free cash flow to shareholders, paid an interim dividend of AUD0.11 per security.

After deducting interest, taxation depreciation and amortization Sydney Airport’s net loss was AUD31.8 million, narrower than the statutory loss of AUD48 million recorded for the first half of 2012. Net operating receipts covered distributions by 1.01 times.

Total expenses for the period were AUD101.1 million, up 9.2 percent from AUD92.6 million for the prior corresponding period. Net finance costs declined to AUD359.8 million from AUD360.1 million, while depreciation and amortization costs totaled AUD114.2 million versus AUD112 million a year ago.

Cash flow covered interest expense by 2.2 times, up from 2.1 times as of June 30, 2012.

As of June 30, 2013, Sydney Airports had AUD217 million of debt due to mature in November 2013, which was covered by undrawn credit facilities. There are no further maturities until November 2014. The company had AUD1.022 billion in committed undrawn facilities available at the half year.

Although the current regulatory environment is a net positive, Sydney Airport is potentially threatened by the desire of certain members of the federal government to build a second airport in Australia’s largest city.

At this point the idea is merely that, an idea, and faces significant logistical, financial and political obstacles.

Sydney Airport’s approach to delivering new capacity has been modular and incremental; management invests and builds to meet customer demand. This approach is the key principle underpinning the company’s new Draft Master Plan to accommodate growth over the next 20 years.

Sydney Airport has invested AUD2.3 billion to support rising traffic over the past 11 years. CAPEX guidance for 2013 through 2015 remains AUD700 million, consistent with the historical trend.

Management recently noted that International traffic has remained strong during the second half of 2013, benefiting from a number of new services in addition to Air India, including new routes to and from China.

Traffic from Malaysia and Singapore has also grown with the entry of Scoot and AirAsia X. Travel between Sydney and these markets have grown 51 percent and 19 percent, respectively, as incumbent carriers in both markets continue to perform well.

New low-cost carriers, including Scoot and AirAsia X, have changed the way Sydney Airport is used: they use infrastructure more efficiently, have higher load factors, and passengers have longer “dwell times” in the airport itself.

The weaker Australian dollar has been neutral for traffic performance but has led to some increased retail sales.

Management has guided to a 2013 total distribution of AUD0.225 per share, which represents 7 percent growth over 2012.

Asian markets, particularly China, continue to support strong international passenger growth for Sydney Airport, while the easing of international air rights will enable further growth.

Sydney Airport is in prime position to capitalize on emerging Asia’s growth. Sydney is a

Proximity to Asia and its growing middle class, with a high propensity to travel, and increased airline capacity put Sydney Airport in a prime position to grow for the long term.

Sydney Airport is a buy up to USD4 on the ASX using the symbol SYD and on the US OTC market using the symbol SYDDF.

Sydney Airport closed at AUD3.75 on the ASX and USD3.28 on the US OTC market on Dec. 13.

Sydney Airport’s fiscal year corresponds with the calendar year, running from Jan. 1 to Dec. 31.

The company reports full financial and operating results twice a year; it typically posts full-year results in February, with half-yearly results out in August.

Final dividends are usually declared in December, with payment made in mid-February. Interim dividends are usually declared in mid-May or mid-June, with payment typically made in mid-August.

Sydney Airport’s final dividend in respect of 2013 of AUD0.115 was declared on Dec. 9, 2013, and will be paid on Feb. 14, 2014, to shareholders of record as of Dec. 31, 2013. Shares will trade ex-dividend on this declaration as of Dec. 23, 2013.

The most recent interim dividend of AUD0.11 per share was declared June 17, 2013. It was paid Aug. 16, 2013, to shareholders of record as of June 28, 2013. Shares traded ex-dividend on this declaration as of June 24, 2013.

According to Bloomberg, Management will likely declare the interim dividend for 2014 on or about May 16, 2014.

Dividends paid by Sydney Airport are “qualified” for US tax purposes. Based on the “fiscal cliff” compromise reached in Washington, DC, in early January 2013 dividends will be taxed at Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

The Australian government withholds 5 percent to 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.

Among the analysts who cover the stock six rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology, while five rate it a “hold.” Two brokerages that cover Crown Resorts rate the stock a “sell.”

The average 12-month target price among the eight analysts that provide a figure is AUD3.88, with a high of AUD4.27 and a low of AUD3.34.  Based on a Dec. 13, 2013, closing price of AUD3.28 on the ASX, the implied one-year total return, including the current annual dividend rate of AUD0.225 per share, is 25.1 percent.