Portfolio Gem: 14% Dividend, 36% Capital Gain in 1 Year!

High dividend-paying stocks are generally not known for capital gains. One of the reasons is very obvious - all dividend payouts are subtracted from the share price which gravitates the price toward the south. However, one REIT (Real estate investment trust) that is not just handing out impressive dividends but also delivering market-beating capital appreciation is IRB InvIT Fund.

It is a trust with a market capitalization of INR 3,730 crores and is managed by IRB Infrastructure Private Limited which is a subsidiary of NSE-listed IRB Infrastructure Developers Limited (NS: IRBI ). It is India’s first infrastructure investment trust formed to democratize ownership of road assets and provide consistent returns to investors.

It operates and maintains a portfolio of well-established road assets in a highly-efficient manner to ensure seamless traffic flow and does toll collections. Over the years, continual improvement in effectively managing operating costs and a robust financial structure marked by AAA credit rating (from both CARE (NS: CREI ) and India Ratings) and low-cost debt, have enabled it to sustainably generate higher cash flows for distributing dividends among unitholders.

In FY22, it witnessed a 13.95% YoY jump in per day gross toll collections to INR 4.9 crores, from INR 4.3 crores in FY21. This led the total gross collections to jump to INR 1,775 crores, from INR 1,487.3 crores a year ago. The most recent data of February 2023 showed a 27% YoY increase in toll collections to INR 351.75 crores

Some of the highest-grossing road assets of the trust are-

1. Tumkur - Chitradurga BOT Project 114.00 km six-lane carriageway

2. Bharuch - Surat BOT Project 65 km (47.35 km six-lane and 17.65 km four-lane)

3. Surat - Dahisar BOT Project 239 km six-lane carriageway

As toll collections are showing consistent and robust growth, dividend payouts have also remained strong. In FY22, it announced a dividend of INR 9 per share, up from INR 8.5 per share in the preceding year. But more interestingly, the average payout ratio over the last three fiscal years remained at 2.6 which depicts a higher dividend than earnings.

On top of this, the trust has delivered a market-beating return of 36.4% in the last one year, marking an all-time high of INR 72 on Friday. Despite this run-up, its dividend yield is standing at a mouth-watering 14% and the icing on the cake is its book value which is still less than 1, at 0.9.

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