Shares of Transurban Group (ASX: TCL) are trending higher today after the toll road owner and operator announced its traffic and revenue data for the March quarter.
In an announcement to the ASX, Transurban said toll revenue climbed an incredible 69.6% to $376 million, compared to the prior corresponding period. Proportional toll revenue, which the company believes better reflects the portfolios' performance, increased by 41.6% to $387.6 million.
However, it's important to note, the prior corresponding period did not include Cross City Tunnel or the Queensland Motorways portfolio. In June Transurban acquired 100% of Cross City tunnel and in early July took control of 62.5% of the Queensland Motorways portfolio. Excluding these interests, toll revenue rose a healthy 10% to $244 million on a statutory basis, whilst proportional toll revenue rose 11.3% to $304.8 million.
The strong results come on the back of improved traffic statistics during the period. Across the Sydney and Melbourne networks traffic rose 8.1% and 4.2%, respectively. Excluding the impact from Cyclone Marcia, normalised growth across the Brisbane network was 4.4% higher.
Is Transurban a rock-solid stock?
Transurban is the type of stock every income investor should seek to buy and hold for the ultra-long term. Whilst undoubtedly there are risks to the business, Transurban's model is founded upon a durable competitive advantage which will likely allow it to increase its toll revenue at, or above, inflation for many years into the future.
In addition, investment in new roads has both short and long-term appeal for investors. All this culminates in a reliable cash flow stream, which is evident from its ability to secure low cost debt from investors.
Such a characteristic is common to all popular dividend stocks, such as Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES).
Should you buy Transurban Group shares today?
Transurban is being forecast by analysts to pay a partially franked dividend of 3.8% in the next year, with shares currently trading at a price-book ratio of 3.2 times. At these prices Transurban trades at a premium to fair value, in my opinion. Meaning, investors wouldn't be getting a bargain if they chose to buy at these levels.
It seems analysts agree, with the average price target on Transurban shares being $9.26 (market price $9.88) according to the Wall Street Journal. Whilst it's important to take price targets with a grain of salt, in this instance I agree with the consensus. Therefore I'd wait for the share price to retreat meaningfully before hitting the buy button.
