Dividends: Why the Transurban share price just hit a record high

Is Transurban Group (ASX: TCL) a buy for its dividends?

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The Transurban Group (ASX: TCL) share price hit a record high of $14.68 today despite the toll road operator releasing no specific news to the market.

The group is mirroring other blue-chip dividend favourites such as Telstra Corporation Ltd (ASX: TLS) in hitting 52-week highs likely because investors are increasingly favouring high dividend paying shares as the Reserve Bank of Australia cuts benchmark cash rates.

For the financial year ending June 30 2019 Transurban will have paid 59 cents per share in dividends (partially franked) to mean it still offers investors a term-deposit-thumping 4% trailing dividend yield.

The kicker is that Transurban's monopoly-like assets and potential to steadily lift tolls on roads means its profit and dividend streams are likely to rise over the long-term for investors. 

Of course investors have to be sensible, as it carries a huge swathe of debt to fund its construction ventures and trades on a high multiple of trailing profits given its attractive business model and popularity with dividend seekers. 

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Transurban Group and Telstra. 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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