Transurban has recently entered into a number of significant transactions, including the $4billion Westgate Tunnel Project, which will help underpin earnings growth of 10% over the next 3 years.
The EBIT growth will flow through to DPS growth of 10% and we see the FY18 DPS of $0.56 increasing to $0.70 in FY21, placing the stock on an attractive forward yield of 6%.
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We recommend investors enhance the yield further, by selling a covered call option. A combination of the dividend and the option premium is generating 12% annualised cash flow.
