Here is an article on Seeking Alpha that I would like to bring to your attention. Toll roads can be classify as an infrastructure asset that acts like a 30 year bond like stream of income.
Basically the company uses equity or debt cash to pay for operating a concession for 30 years, using the cash flow to pay back the interest, maintenance and dividends to the share holders.
Typically debt levels are high.
This article by Clemens Scholl goes into:
- How toll roads comes about, the history of it
- Where are the publicly listed toll roads around the world
- Summary of the toll roads and their financial data
- Different characteristics of the companies
Have to say that out of all the tolls, Bangkok Expressway listed on the thailand stock exchange looks interested with a debt to asset of nearly 45% and dividend yield of 7.1%.
[Full Article @ Seeking Alpha]
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Marti
Thursday 4th of August 2011
Well the issue is knowing if the lease/concession is properly accounted for by a depreciation of assets. The rules are not the same everywhere depending on countries and type of company/trust, and that information is never easily accessible. This makes comparing yields tricky.
Marti
Monday 1st of August 2011
My concern with such businesses is the short length of the concessions. When the company has only 20 or 15 years left on the concession, the dividend suddenly doesn't look so good. This has also been my problem with some of the industrial S-REIT who mostly own buildings with leases expiring in 25 to 30 years.
Drizzt
Monday 1st of August 2011
hi Marti, to me that is not so much a problem if you know what you are getting. if they pay you 15% yield for a shipping stock it is NOT BAD. the important thing is knowing roughly what is the maturity date. by that i mean that instead of operating for 40 years this one is for 15 years.
it is believing this is like a normal company that runs forever that becomes a problem.
if you know K-Green trust pays 7% but its assets run for only 20 years and the yield to maturity is actually 3% then you can evaluate better.