Atlas Arteria (ASX: ALX): Can This Toll Road Giant Keep Its Dividend Engine Running?
When markets get volatile, income investors look for stability and infrastructure stocks often deliver it. Atlas Arteria (ASX: ALX), one of the world’s leading toll road operators, is doing exactly that. Despite macro headwinds and inflation-linked costs, ALX continues to pay dividends and maintain a capital return strategy backed by real, recurring cash flows.
A Dividend Built on Long-Term Concessions
Atlas Arteria operates a portfolio of toll road assets across France, Germany, and the United States, anchored by long-term concession agreements that generate consistent cash flow. In 1H FY24, the company declared a fully franked interim distribution of 20.5 cents per share, which was paid in August 2024.
This follows a solid FY23, in which ALX returned a total of 41.0 cents per share, fully franked - a yield that remains attractive in today’s market. Unlike many companies that fund dividends through borrowings, Atlas Arteria aligns payouts with proportional net toll revenue from its global assets, particularly APRR in France and Dulles Greenway in the US.
What Income Investors Should Watch
If you’re tracking Atlas Arteria as a dividend candidate, these are the key metrics to monitor:
- Proportional net toll revenue: $937.7 million in 1H FY24, up 5.2% year-on-year
- Distribution coverage: Backed by $377 million in cash flows from operations before financing
- Traffic growth: APRR traffic up 2.1%, with a positive trend expected to continue
- Franked dividends: All distributions remain fully franked, enhancing after-tax yield
- Balance sheet strength: $451 million in available liquidity at group level as of June 30, 2024
Consistency, Not Speculation
What makes ALX attractive to dividend-focused investors isn’t explosive growth it’s the reliable compounding of cash from stable infrastructure. The company’s French APRR asset, for example, continues to deliver over 85% of proportional earnings, with index-linked toll increases providing a natural inflation hedge.
ALX’s long-dated concessions and high EBITDA margins (typically >70%) provide strong visibility on future earnings. Even with capex requirements for road maintenance and compliance, the company has reiterated guidance to pay 42 cents per share in total FY24 distributions, again fully franked. That reflects a forward yield that remains competitive even against higher-rate alternatives.
Importantly, ALX doesn’t overcommit. It manages capital returns within the boundaries of free cash and available liquidity, with no exposure to construction risk or variable merchant revenues.
Conclusion
Atlas Arteria isn’t chasing headlines it’s delivering dividends. With traffic volumes growing, inflation-linked pricing in place, and a fully franked payout policy, ALX offers income stability backed by hard infrastructure. For investors seeking yield without chasing risk, this toll road operator could keep the cash flowing and the portfolio balanced well into 2025 and beyond.
Aurizon (ASX: AZJ): This Rail Giant Keeps Delivering Dividends - Should You Ride Along?
In a high-interest, uncertain market, investors are retreating from high-growth plays and refocusing on something more tangible: income. And in that search, few names on the ASX offer the blend of consistency, scale, and yield that Aurizon Holdings Limited (ASX: AZJ) brings to the table. As Australia’s largest rail freight operator, Aurizon isn’t just moving bulk commodities. It’s moving steady dividends into investors’ pockets.
Dividend Strength Backed by Heavy Cargo
For 1H FY24, Aurizon declared an interim dividend of 8.2 cents per share, fully franked, matching the payout from the prior corresponding period. This decision to maintain dividends, despite softer statutory NPAT, underlines the company’s policy of returning 70 to 100 percent of underlying NPAT to shareholders. In this case, they chose to return the full 100 percent.
Underlying NPAT for the half came in at 169 million dollars, supported by total group revenue of 2.01 billion dollars. While statutory profit declined due to impairments in the Bulk segment, core operations remained solid. Most importantly, operating cash flow hit 607 million dollars, demonstrating Aurizon’s ability to comfortably fund both growth initiatives and dividend distributions without relying on new debt.
Aurizon’s dividend yield, when grossed up, remains north of 6 percent. That is a level few other infrastructure or industrial stocks can match with the same degree of reliability.
What to Watch if You’re Investing for Dividends
For dividend-focused investors, here’s what to track when evaluating Aurizon’s sustainability:
- Payout ratio of 70 to 100 percent of underlying NPAT. A clearly communicated and consistently applied policy
- Strong cash flow. 607 million dollars in 1H FY24 operating cash, giving the company room to fund capex and maintain payouts
- Low risk regulated earnings. The Network segment delivers predictable, inflation-linked returns
- Leverage discipline. Net debt to EBITDA sits at 2.6 times, within management’s comfort range and aligned with its credit rating
- Active DRP (Dividend Reinvestment Plan). Offers tax-effective compounding for long-term investors
Capital Return with Infrastructure Stability
Aurizon’s stability comes from its business mix. Around half its earnings come from the regulated Network business in Queensland, which operates under long-term access agreements tied to CPI. This ensures that, regardless of commodity cycles, a stable base of earnings supports its dividend policy.
The other half of the business - Coal and Bulk haulage brings exposure to volume growth and productivity improvements. Despite some challenges in the Bulk segment, Aurizon continues to win new contracts and optimise its fleet and operating model.
Notably, the company is not chasing yield by overextending. Capital expenditure remains disciplined, and debt is managed conservatively. Aurizon’s balance between shareholder returns and infrastructure reinvestment is calibrated for the long haul.
Conclusion
Aurizon might not grab headlines, but it does something far more valuable in today’s market. It pays. With reliable cash flow, a transparent dividend policy, and a business model that hedges against inflation and demand shocks, AZJ remains one of the more dependable yield options on the ASX. For investors looking to balance income with capital safety, this rail freight giant is still firmly on track.
(Source: Company Announcements)
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