If you want to follow the lead of one of the world’s great investors, then Warren Buffett should be your role model. Since taking control of Berkshire Hathaway (NYSE: BRK-B) 48 years ago, Buffett has delivered 20% average annual returns to investors time and again.

Buffett is so successful because he only invests in companies that have a wide “economic moat,” or an advantage that allows them to consistently stay ahead of the competition. Companies can build an economic moat by having industry-leading market share, being a low-cost producer, having proprietary products or by making customer switching costs prohibitively high.

Mexican airport-management firm Grupo Aeroportuario del Cento Norte (Nasdaq: OMAB) is a great example of such a company. Grupo Aero is the sole supplier of services to 13 regional airports in central and northern Mexican states, which are operated as state-awarded monopolies.

Grupo Aero is mainly a play on Mexico’s internal growth, since only three of the country’s airports — Mazatlan, Acapulco and Zihuatanejo — serve major tourist destinations. And Mexicans are traveling more than ever as a result of the country’s improving economy.

Mexico’s economic recovery is mainly tied to rising exports and growing foreign investment by companies that want to take advantage of Mexico’s low inflation and labor costs. Its economy grew 4% last year, on top of 5% growth the previous year, outperforming the world’s developed economies. The International Monetary Fund forecasts Mexico’s economy to grow 3.5% this year, which is much higher than the 2% growth projected for the U.S. economy and the 0.5% contraction expected for the euro zone.

Grupo Aero has management contracts that run through 2048 on all 13 airports it serves — exactly the kind of long-term certainty Buffett looks for in an investment. The company operates airports serving Monterrey — the country’s third-largest city — and popular tourist destinations such as Mazatlan and Acapulco. Nearly 12 million passengers traveled through its airports during 2011. In addition, domestic terminal passenger traffic was up 3.4% in 2011 compared with 2010, reflecting 23 new domestic routes added by the eight carriers serving its airports in the past 18 months.

Grupo Aero generates nearly 70% of its revenue from per-passenger take-off and landing fees, and the remainder (reported as non-aeronautical service revenue) from parking fees, restaurants and retail concessions.  This means Grupo Aero is essentially a toll collector — the more passengers fly in and out of its airports (and the more money they spend in the airports), the more Grupo Aero makes.

Solid numbers and projections
Grupo Aero’s revenue improved 4.4% to about $157.4 million during the first nine months of 2011 compared with a year earlier, as a result of increased traffic, higher airline tariffs and a 20.2% surge in non-aeronautical revenue, which totaled roughly $33.2 million. 

Analysts say Grupo Aero can deliver earnings growth of 14% in 2012 and 22% in 2013. A stronger U.S. economy would also help the company by increasing travel to Mexico. While overall passenger traffic through Grupo Aero airports was up in 2011, international traffic was down 7.4% from the prior year at 1.8 million.  A return of international traffic to pre-recession levels would boost passenger tariffs and income even more.

Grupo Aero recently opened a new terminal at the Monterrey airport and a 287-room hotel inside Terminal 2 at the Mexico City International airport. The company also plans to invest about $214.3 million in upgrades and expansions of its terminals and improvements to its runways during the next three years. These investments should help Grupo Aero attract even more passenger traffic and retail businesses for its terminals.

The dividend
Grupo Aero generated nearly $36.6 million of cash flow in the first nine months of 2011, which was more than enough to cover $23.3 million of dividend payments.

Dividends are also supported by a strong balance sheet. Grupo Aero has cash of nearly $44.5 million, long-term debt of $117.4 million and just 20% of capitalization.

Grupo Aero has a six-year record of dividend payments and pays quarterly. The $0.52 annual dividend yields 3.5% currently and has yielded 4.1% on average in the past five years. Although Grupo Aero hasn’t raised the dividend since 2008, payout has gradually declined from 115% to 60% of earnings, which creates room for dividend growth.  

Such robust fundamentals are reflected in the company’s excellent debt rating — “AA+” — from Standard & Poor’s and Fitch Ratings. Another source of financial strength for Grupo Aero is a 16% equity investment by  SETA, which is jointly owned by Aeroports de Paris, the second-largest European airport operator; and ICA, Mexico’s largest engineering, procurement and construction company.

Shares of Grupo Aero had gained 112% in the past three years, but when the S&P 500 dipped in July 2011, the stock fell 33%. Shares have since recovered by about 23%, and now trade above $15.

Risks to consider: There is some currency risk to this stock, since dividends are paid in pesos, as well as a 10% withholding tax on dividends paid to U.S. investors. But investors can recover the tax by claiming a foreign tax credit on their annual IRS tax filing. Highly-publicized drug violence in Mexico is also a concern, since it may deter tourism and slow growth in international traffic through Grupo Aero’s airports.  

Action to take –> If, like Buffett, you prefer investments that have a wide economic moat, then I recommend holding Grupo Aero. The company’s monopoly on airport services supports the strong dividend, and it’s poised for improving earnings growth because of Mexico’s economic recovery, which should help boost the share price going forward.