The Transurban Group (ASX: TCL) share price has fallen to $11.56 after almost reaching $13 late last year, representing an 11% fall.
Therefore, it's worth considering if it's a buy at this price – particularly for income investors because the yield has grown in line with the price fall.
Transurban manages and develops urban toll road networks in Australia and the USA. It has been operating since 1996.
The business recently reported its half-year report for the first six months of FY18. Some of the highlights included average daily traffic growing by 1.4%, proportional toll revenue increasing by 10.5% to $1.176 billion and proportional earnings before interest, tax, depreciation and amortisation (EBITDA) growing by 11.6% to $911 million.
Transurban also announced that the half-year distribution was 12% and that the full-year distribution will be 56 cents per share, representing 8.7% growth over FY17.
The business is generating strong growth as cities get bigger and there's more cars on the road. Plus, the business can increase the toll price each year and people will continue to pay it because of how big of a timesaver its roads are.
I think that Transurban's underlying revenue and EBITDA will grow very nicely over the coming years.
However, in the shorter-term I have a worry about how the market will treat Transurban's share price as interest rates rise. Infrastructure stocks are seen as some of the safest options and could be hit hardest as interest rates rise. It's very hard to say how much the market would punish the share price.
In the longer-term, experts believe that toll roads will be losers from the shift to automated cars. I think the point of seeing mass automated cars on the road is a very long time away. The technology needs to be improved significantly, then road laws will need to be changed.
Foolish takeaway
Overall, I think that Transurban's FY18 distribution yield of 4.8% is fairly attractive in this environment, but I don't believe that it will be a market-beater over the next three years or decade.
