TCL share price in focus
Tranban, founded in 1999, manages and develops urban toll road networks in Australia, Canada and the United States.
Tranban has interests in 22 urban motorways in its portfolio. Some of its notable motorways include the City Link in Melbourne, the Hills M2 in Sydney and the Logan Motorway in Brisbane.
Transurban invests heavily in the development of new projects which are paid for by collecting toll revenue from motor vehicles.
ASX Industrial Shares Appeal
S&P/ASX 200 Industrial Index (ASX: XNJ) consists of companies involved in transportation, commercial and professional services, and building and operating infrastructure. Over the past 5 years, the Industrials Index has returned 6.6%. This is higher than the ASX 200 return of 5.3% over the same period. So, if we want to generalize, why would you want to invest in companies in an industrial sector like TCL?
Reliable
Industrial companies, more often than not, have strong and relatively reliable revenue streams. This can happen for a few different reasons.
For a company Downer Eddy Limited (ASX: DOW), a significant portion of their revenue is derived from large, multi-year government contracts. While these contracts can be difficult to obtain, and infrastructure investment tends to decline during economic downturns, once a company has a contract, that revenue is effectively locked in for the next few years. This makes predicting future income relatively easy.
Like for other industrial companies Transurban Group (ASX: TCL), Qantas Airways Limited (ASX: QAN), or BRAMBLE’S LIMITED (ASX: BXB), reliability stems from the fact that they provide essential and frequently used services. Transurban operates toll roads used daily by commuters. Qantas may have success on leisure travel but it has important functions in business travel and freight operations that are more flexible. And Brambles provides pallet pools that enable transportation of nearly every item to a supermarket or KMART. TCL’s revenue has been experienced Compound Annual Growth Rate (CAGR) 12.6% in last 3 years.
profit
One of the obvious advantages of fixed income is that industrial companies are able to pay consistent dividends. TCL currently offers a dividend yield of 4.15% and has averaged 3.6% over the past 5 years. Incorporating an industrial company like TCL can be an effective way to generate income from your portfolio while remaining invested in equity.
A bet on the economy
Investing in an industrial company bets on economic growth in several ways. For most companies in this broad sector, revenue growth is almost directly linked to government investment in infrastructure (more big contracts, bigger logistics networks) and population growth (more people using toll roads, public transport and other infrastructure). So, when the economy is strong, spending is rising, and the population is growing, a company like TCL may be in an excellent position to take advantage.
TCL share price price
https://www.youtube.com/watch?v=Qpuru-blkdc
One way to keep a ‘fast read’ of where TCL’s share price is headed is to study something like dividend yield over time. Remember, the dividend yield is effectively ‘cash flow’ to the shareholder, but it can fluctuate from year to year or between payments. Currently, Tranurban Group’s dividend yield is around 4.15%, while its 5-year average is 3.64%. Simply put, TCL shares are trading above their historical average dividend yield.
Be careful how you interpret this information though – it could mean profits are rising, or it could mean the share price is falling. In TCL’s case, last year’s profit was higher than the 3-year average, so the profit continues to grow.
Rask websites offer free online investing courses, developed by analysts that explain things like discounted cash flow (DCF) and the dividend discount model (DDM). They even include free valuation spreadsheets! Both these models will be a better way to value TCL share price.
