Transurban lifts final dividend by 21% as fourth quarter traffic tops pre-pandemic levels

Transurban (ASX: TCL) hiked its final dividend by 21% to 26 cents as fourth quarter traffic exceeded pre-pandemic levels to reach a new all-time high.

“While traffic numbers were broadly flat year-on-year from COVID-19-related disruptions and severe rainfall events in Queensland and NSW, it was encouraging to see fourth quarter traffic reaching a new high and exceeding pre-pandemic levels," commented CEO Scott Charlton.

Results at a glance:

Source: Transurban | Table: Market Index

Recovery play with inflation protection

"Inflation-linked toll escalations and the Group’s hedging profile is expected to provide a net benefit over the near term in an inflationary environment," noted the Transurban earnings presentation.

"The March and June 2022 quarter CPI is expected to be embedded into the base toll prices for assets with CPI linked escalation over the course of FY23."

"The combination of inbuilt inflation protection and a balance sheet structured on conservative views around interest rates means we are well positioned for growth throughout the cycle," said Charlton.

The recovery of Group traffic was supported by an improvement in airport and CBD activity, as well as pent-up demand for leisure travel and the commissioning of new assets.

Traffic performance to-date in FY23 has continued to grind higher towards record territory.

Source: Transurban

FY23 dividends well-below expectations

Transurban expects its FY23 distribution to be 53 cents per share, representing approximately 30% growth on FY22.

Still, the guidance was well-below broker expectations, with Morgans expecting an FY23 dividend of 59.5 cents.

Also weighing on shares were higher cost considerations for FY23, predominately due to:

• Corporate and operational cost inflation

• Volume related costs expected to grow in-line with traffic recovery

• Development projects which are expensed in the early stages

Transurban share price chart (Source: TradingView)