There's blood on the street but one ASX stock that's holding up better than most today is the Transurban Group (ASX: TCL) share price.
Shares in the toll road operator is holding steady at $14.31 during lunch time trade when the S&P/ASX 200 Index (Index:^AXJO) crashed by around 3%.
The big sell-off on Wall Street that was led by high-flying tech stocks are to blame for the carnage on the ASX. This is why our tech darlings like the Afterpay Ltd (ASX: APT) share price and Appen Ltd (ASX: APX) share price are among the worst performers.
Transurban share price upgraded to "buy"
It looks like investors are rotating out of these expensive growth stocks and into relatively more stable businesses that have suffered a big de-rating during COVID-19.
This partially explains the outperformance of Transurban, although a broker upgrade is also helping.
UBS lifted its recommendation on the stock to "buy" from "neutral" as it thinks too much bad news is factored into the stock.
Boring stocks suddenly looking exciting
It also believes that Transurban will rebound strongly as Melbourne emerges from its stage four lockdown.
Most of Transurban's toll roads are in that state, which explains why the stock was hit particularly hard by the second wave of COVID-19 infections in that state.
"We see the stock as highly leveraged to recovery in that network given Melbourne accounts for one-third of group EBITDA [earnings before interest, tax, depreciation and amortisation]," said UBS.
"Further the market continues to seek out quality growth names in a structurally lower growth environment."
Big dividend growth ahead
But this these aren't the only reasons to be excited. The broker reckons Transurban's annual dividend yield could double to around 13% from FY22 to FY25.
The big dividend increase will be funded by the completion of a number of big development projects in its pipeline.
"Our strong 13% pa growth from FY22-25E relies on completion of WestConnex Stage 3 in Sydney, WestGate Tunnel in Melbourne, and a number of Washington projects," explained UBS.
"These are all expected to complete in 2023 and 2024. The largest risk remains the contractual dispute over the WestGate Tunnel project."
What Transurban shares are worth
Other risks to the lofty dividend assumption are a slower than expected easing of the lockdown in Melbourne and the underperformance of its Washington asset.
The broker lifted its 12-month price target on the stock to $15.50 from $14.70 a share.
