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Why Aurizon Holdings Ltd (ASX:AZJ) now offers investors a 6% yield

Aurizon Holdings Ltd (ASX: AZJ) released its FY2018 financial results today with the company achieving its three year transformation target of saving $380 million.

The raw numbers

The key financial highlights from the announcement were as follows:

  • Revenue of $3,113 million (a modest 1% decrease from last year)
  • Underlying EBIT was $941 million (up 6% from last year)
  • Statutory net profit after tax was $560 million (up from a loss of $37 million last year due to one off impairments)
  • Group capital expenditure was $490 million (8% lower than last year)
  • Return On Invested Capital of 10.9% (up marginally from 9.3% last year)
  • Total dividend per share of 27.1 cents (an effective 6% dividend yield)

The final divided is 60% franked and is a 100% payout of underlying net profit after tax from continuing activities.

What did management have to say?

Aurizon Managing Director & CEO Andrew Harding emphasised that the company was performing well in light of the different challenges its facing and that returning capital to shareholders would remain a priority.

He said, “Despite major regulatory challenges, Aurizon delivered a solid performance in FY2018. Underlying EBIT was up 6%, we achieved the $380 million three-year transformation target, and delivered record coal volumes for customers. We have demonstrated our commitment to returning capital to shareholders, and since March 2017 we have distributed more than $1 billion to shareholders through dividends and share buybacks.”

Outlook

Looking ahead, the company’s future remains uncertain with unknown outcomes for the UT5 Access Undertaking and transitional tariffs only being in place, at this stage, through to December 2018.

Even though the company has previously flagged these concerns for FY 2019, I think the uncertainty is likely to keep the share price depressed as the company is unable to accurately forecast its earnings for 2019.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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