Financial news wires are reporting that the analysts at Macquarie Group Ltd (ASX: MQG) have run the numbers on toll road operator Transurban Group (ASX: TCL) and come up with a bullish $15.48 12-month share price target.
Its shares are up 1.2% to a record high of $14.91 in response to the news.
Another factor lifting the share price is the Reserve Bank of Australia’s latest cash rate cut and yesterday’s admission that further easing over the short term is “more likely than not”.
Falling cash savings rates will create more bidders for dividend shares that are perceived as relatively low risk such as Transurban or Sydney Airport Holdings (ASX: SYD).
Transurban recently told investors its final dividend for the six months ending June 30 2019 would be 30 cents on top of the 29 cents per share paid over the interim reporting period.
That means Transurban offers a yield of 3.96%, with analysts forecasting that the dividend could rise to 62 cents in FY 2020. This places it on an estimated forward yield of 4.16%, which is still a long way above the 1.3% or so a bank such as the National Australia Bank Ltd (ASX: NAB) now pays on a standard savings account.
Transurban also has significant development projects underway in Sydney, Melbourne, Brisbane and the U.S. to suggest it may have some growth ahead of it. However, investors should remember it carries a lot of debt and now trades on a profit multiple above historic norms.
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Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Transurban Group and Sydney Airport. The Motley Fool Australia has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019