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Is the Transurban share price an ASX bargain buy at $13?

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Is the Transurban Group (ASX: TCL) share price an ASX bargain buy right now?

Transurban shares are still quite a ways off of the 52-week high of $16.44 back in February. In fact, the current share price of $13 (at the time of writing) represents a 21% discount off this high. Does that mean we are seeing a Transurban sale today, or has the market come down to earth on this toll-road king?

Why Transurban shares have fallen

Transurban used to be regarded as one of the safest dividend shares on the ASX. It owns a portfolio of tolled arterial roads across most of our major capital cities in Australia – infrastructure that is essential to our economy.

Since the Transurban share price rose over 50% between October last year and February 2020, investors clearly thought nothing could knock this company off its pedestal.

Unfortunately, the coronavirus has done just that. Traffic volumes passing through Transurban’s networks fell heavily in March, with the last week of the month seeing a 48% decline in vehicle numbers.

We are probably going to see similarly depressed levels this month too.

As such, we saw Transurban shares fall below $10 last month before recovering to the levels we see currently.

Is Transurban still a quality dividend buy?

It’s hard to know long these trends will continue. Yes, I would assume traffic volumes will return to a more normalised level sometime in 2020. But as more and more people work from home, perhaps some will make the shift permanently. This could be bad news for a toll road company over the long-term.

Transurban has already indicated its dividend in 2020 will take a hit. It scrapped its previous dividend guidance last month and now intends to pay out a fixed proportion of its cash flows this year, whatever they may be.

But all things considered, I would still consider this a good company to own for long-term dividend income. Even if our workforce undergoes a permanent shift towards working from home, there are a lot of vehicles that will continue to use our roads regardless, such as Uber drivers, freight trucks and tradies. I don’t expect too much disruption to these industries for a while yet.

Transurban also has its lucrative tolling contracts as a bonus as well. Most of the company’s roads are permitted to increase their tolls by at least 4% every year. That’s a lot of earnings certainty right there.

As such, I would still be interested in Transurban as a long-term dividend share, although I would be in more of a hurry if the share price was a little lower than its current offering.

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Sebastian Bowen owns shares of Uber Technologies. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia owns shares of Transurban Group. 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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