Transurban share price jumps as dividends hit pre-pandemic highs

A man leans out of his car window with a massive smile on his face and waves.A man leans out of his car window with a massive smile on his face and waves.

The Transurban Group (ASX: TCL) share price is outperforming the market this morning after it announced an increase in its final dividend.

The toll road operator said it will pay a distribution of 26 cents a security for the six months ending 30 June 2022.

This is the highest final dividend that the group has paid since 2019, just before the COVID-19 mayhem.

Increase in dividends lifts Transurban’s share price

The final dividend also represents a 21% increase over the 21.5 cents a security payment it made this time last year.

The news sent the Transurban share price revving up 2.2% to $13.93 in early trade. This compares to a flat open for the S&P/ASX 200 Index (ASX: XJO).

Distribution details

The final dividend is made up of a 24 cent a security payment from the Transurban Holding Trust and its controlled entities. The balance is paid from Transurban Holdings Limited.

This takes the full-year dividend to 41 cents a security which gives a net yield of 3% using the current Transurban share price.

Of the total FY22 distribution, 2 cents of this are fully franked. The distribution may also be tax-deferred and more details will be released in August.

The distribution also includes the circa 2.5 cents per security in capital releases. This is related to Transurban’s increased stake in WestConnex where the capital releases are used to minimise the dilutive impact of the deal.

Other tailwinds for the Transurban share price

The increase in distributions may not be the only factor driving interest in the Transurban share price.

Some experts believe that ASX infrastructure shares are likely takeover targets in this volatile environment.

Such shares, including Transurban, generate a relatively stable earnings stream. Their contracts also typically provide an inflation adjustment too.

Do ASX infrastructure shares make good targets?

These are desirable qualities given the high inflation outlook with rising costs threatening to erode corporate profits.

Fears of a sharp economic slowdown in the form of stagflation or a recession only make defensive ASX shares like Transurban more desirable.

Other ASX shares with similar qualities to the Transurban include APA Group (ASX: APA) and Atlas Arteria Group (ASX: ALX) with the latter facing a potential takeover.

The Transurban share price has fallen around 5.6% over the past year, even with today’s rally. In contrast, the ASX 200 has lost more than 12% during the period.

The post Transurban share price jumps as dividends hit pre-pandemic highs appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau 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 positions in and has recommended APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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