Grupo Aeroportuario del Sureste

Investors looking for strong and steady growth potential and a juicy dividend should check out Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASR - Snapshot Report).

The company recently delivered better than expected second quarter results, prompting analysts to raise their earnings estimates for both 2011 and 2012. This sent the stock to a Zacks #2 Rank (Buy).

Based on current consensus estimates, analysts project 15% EPS growth this year and 16% growth next year.

On top of this growth the company pays a dividend that yields a stellar 4.7%.

Mexican Monopoly

Grupo Aeroportuario del Sureste, or "Southeast Airport Group" for the non-Spanish speakers, is a Mexican airport operator with concessions to operate, maintain and develop the airports in tourist-heavy southeast Mexico, including Cancún, Veracruz and Cozumel.

The company was formed in 1998 after the Mexican government decided to privatize some of its airports. The company has experienced strong and relatively steady revenue and profit growth since then as it essentially has a monopoly of the airports in southeast Mexico.

Second Quarter Results

ASR reported second quarter earnings per share of $1.10, beating the Zacks Consensus Estimate by 4 cents. It was a 12% increase over the same quarter in 2010.

Total revenue increased 7% over the same quarter in 2010. Aeronautical revenues rose 5% driven by a 2.9% increase in total passenger traffic. Commercial revenues per passenger rose 8%.

Operating profit increased 11% year-over-year as the operating margin expanded 160 basis points to a whopping 48.1%. Meanwhile, the net profit margin improved from 33.7% to 35.3% of total revenues.

Outlook

Analysts revised their estimates higher for both 2011 and 2012 following the strong second quarter. This sent the stock to a Zacks #2 Rank (Buy).

Analysts are projecting strong growth for ASR over the next years. Based on consensus estimates, analysts expect 15% EPS growth this year and 16% growth next year.

Dividend

ASR pays an annual dividend based on its annual net retained earnings. In May 2011 the company paid a dividend of $2.55 per share, up from $2.02 in 2010.

This corresponds with a solid 4.7% dividend yield.

Valuation

The valuation picture looks attractive for this wide-moat business. Shares trade at just 12.1x 12-month forward earnings, a discount to the industry average of 15.4x and its 10-year median of 18.1x.

Its price to book ratio of 1.2 is in-line with the peer group.

The Bottom Line

With a virtual monopoly of the airports in a tourist-heavy region of Mexico, Grupo Aeroportuario del Sureste should deliver strong earnings growth for many years. With rising earnings estimates, a fat dividend yield and reasonable valuation, now looks like a good time to get in.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

Read the full analyst report on ASR