Is the Transurban Group (ASX: TCL) share price a buy for income?
Transurban is one of the most popular shares on the ASX for income, it currently has a projected FY19 distribution yield of 4.5%, which looks pretty good compared to the current interest rate you can get from a bank savings account.
However, I don't think any business is a buy at any price – I think a lot depends on the future earnings.
Transurban has done a good job of balancing toll price increases and traffic growth. Just yesterday the business unveiled average daily traffic (ADT) growth of 2.3% across all markets.
In Sydney, Transurban said that the new M4 tunnels are nearing completion and is scheduled for opening in mid-2019. Tunnelling has commenced on the third stage of WestConnex, the M4-M5 Link. Sydney produced ADT growth of 2.1% for the quarter.
In Melbourne, works continue on the West Gate Tunnel Project in preparation for tunnelling in a couple of months. Assembly of the first Tunnel Boring Machine cutterhead is almost complete. Melbourne ADT increased by 3.1% for the quarter.
In Brisbane, the Gateway Upgrade North project has been completed and construction of the Logan Enhancement Project is now 90% complete. Brisbane ADT increased by 1.1% during the quarter.
In North America, the 395 Express Lanes project is now over 55% complete and is expected to open late 2019 and the Fredericksburg Extension is expected to reach financial close by the end of FY19 with construction of the extension expected to begin later this year. North American ADT increased by 2.9%.
Foolish takeaway
The March 2019 update was typical of the rewards and risks of Transurban. It is exposed to the growing urban populations with the toll roads it owns and operates, however it is going through significant investment which could be risky if they aren't completed on time or on budget. The search for income has driven its share price quite high.
