In morning trade the Transurban Group (ASX: TCL) share price has climbed 1% to $$11.46 following the release of the toll road operator's half-year results.
For the six months ended December 31 Transurban reported a 10.5% increase in proportional toll revenue on the prior corresponding period to $1,176 million and an 11.6% increase in proportional earnings before interest, tax, depreciation and amortisation (EBITDA) to $911 million.
During the period the company saw a 1.4% increase in average daily traffic (ADT) on its network of roads thanks largely to its Sydney division. ADT on its Sydney roads increased by 2.9% to 667,000 trips, with growth seen across all assets. This led to proportional toll revenue from its Sydney division increasing by 9.8% to $476 million.
The company's Melbourne roads performed strongly as well despite a fall in traffic. Proportional toll revenue increased by 14.2% to $388 million, while ADT decreased by 1% to 820,000 transactions. The fall in traffic was due to the negative impact of the CityLink Tulla Widening works. This didn't stop EBITDA in the division increasing 17.5% on the prior corresponding period.
Elsewhere, its Brisbane roads delivered a 3.5% increase in proportional toll revenue to $200 million on the back of a 3.5% lift in ADT. And its Greater Washington roads generated proportion toll road of US$87 million, up 17.9% on the prior corresponding period thanks to a 3.4% lift in ADT.
As a result of this strong first-half, management has advised that the board has declared a 28 cents per share distribution that will be paid to eligible shareholders on February 16. This will consist of a 25.5 cent per share distribution from Transurban Holding Trust and a 2.5 cents per share fully franked dividend from Transurban Holdings Limited.
Looking ahead, management has provided full-year distribution guidance of 56 cents per share, representing growth of 8.7% on FY 2017's distribution.
Should you invest?
I think Transurban is a fantastic company and its near-monopoly on Australian toll roads makes it a very attractive investment option.
However, I do think its shares are a touch expensive at the moment given the outlook for rising rates and widening risk-free bond yields. In light of this, I would class Transurban as a hold and intend to wait and buy in at a cheaper price in the future should an opportunity present itself.
In the meantime, I see more value in dividend shares like WAM Capital Limited (ASX: WAM), Sydney Airport Holdings Pty Ltd (ASX: SYD), and Aventus Retail Property Fund (ASX: AVN).
