Is the Transurban (ASX:TCL) share price in the buy zone for income investors?

ASX dividend shares represented by cash in jeans back pocket

The Transurban Group (ASX: TCL) share price has continued to trade sideways this month.

This has largely been the case all year, with the toll road operator’s shares up just 1% in 2021.

Can the Transurban share price climb higher?

The team at Morgans believe there’s room for the Transurban share price to push higher from here. Together with its attractive and growing dividend yield, the broker appears to believe this make it a good option for income investors.

According to a note, its analysts have retained their add rating but trimmed their price target on the company’s shares to $14.57.

Based on the current Transurban share price, this implies a return of 6% for investors before dividends and 8.5% including the 35 cents per share dividend the broker is forecasting in FY 2022.

Though, it is worth noting that Morgans expects a big increase in Transurban’s dividend the following year to 55.2 cents. This represents a far more generous yield of 4% for investors.

What did the broker say?

Morgans notes that Transurban has reached an agreement with the Victorian Government and the CPB John Holland Joint Venture on revised terms for the delivery of the West Gate Tunnel Project (WGPT).

This will see Transurban contribute an additional $2 billion to the WGTP across FY 2023 to FY 2026, which is $0.9 billion above what Morgans had previously assumed.

And while it thinks the size of Transurban’s “financial contribution to complete the WGTP will be disappointing for investors, resolution of the dispute removes a major uncertainty.”

Furthermore, the broker believes the “NPV impact is partly reduced by the later phasing of the spend and also by the increased tax depreciation shield it creates until concession end.”

Why invest?

Morgans remains positive on the future and notes that there are a number of trends that are supportive of Transurban’s growth.

It explained: “We view TCL as a high quality pure-play toll road infrastructure portfolio benefitting from employment and population growth, urbanisation, and the value of time, with particular exposure to the east coast capital cities in Australia.”

The post Is the Transurban (ASX:TCL) share price in the buy zone for income investors? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Transurban right now?

Before you consider Transurban, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Transurban wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s