It's time to speculate in dividends for another year. Let's take a look at the Nanjing-Shanghai Expressway of A-share traditional high-dividend stocks. Nanjing-Shanghai Expressway is the only listed highway enterprise in Jiangsu Province, and it is also the leading highway enterprise in China, mainly engaged in Jiangsu section of Shanghai-Nanjing Expressway and other Jiangsu sections of expressways.The expressway operated by the company reached 830 km, accounting for 17.6% of the total expressway in Jiangsu.The hinterland of the Yangtze River Delta has stable economic growth, strong population aggregation and high car ownership, which ensures the company's business growth.

With the economic development of the Yangtze River Delta, the company's profits and dividends show a steady growth trend.The net profit increased from 1.174 billion yuan in 2006 to 4.377 billion yuan, and the amount of dividends increased from 957 million yuan to 2.306 billion yuan.Before that, when the Nanjing-Shanghai Expressway completed its expansion in 2006, the capital expenditure was low, the dividend payout rate was very high, and the dividend yield was once above 8%. The share price of Nanjing-Shanghai Expressway has maintained its growth trend in recent years, although the annual increase is not too large, it has more than doubled in the past 14 years, and now the dividend yield has fallen back to 4%. Although the dividend yield has dropped a lot, it is still a leader in the A-share market.

Why can Nanjing-Shanghai Expressway achieve steady growth in dividends?In the context of the national highway expansion, the company's operating mileage has not increased significantly. The high-speed operating mileage of the company is 700 km in 2006 and 820 km in 2018. The average daily traffic doubled to 39468 in 2006 and 74978 in 2018. The average charge per vehicle did not increase significantly from 2006 to 2018, that is, the level of highway tolls did not increase significantly.Generally speaking, the performance growth of Nanjing-Shanghai Expressway mainly comes from the growth of daily average traffic flow, and the utilization rate of high-speed is improving.

In the past ten years, with the improvement of people's living standards, the number of cars in China has increased significantly. The number of cars in China was 49.85 million in 2006, 240 million in 2018 and 260 million in 2019, showing a significant increase. The dense urban network in the Yangtze River Delta is also more suitable for self-driving, and the company's extensive layout in the Yangtze River Delta makes it fully benefit from the growth of intercity traffic.

In 2018, the company's toll road business revenue was 7.46 billion yuan, accounting for 74.8% of the total revenue.The gross profit is 4.85 billion yuan, accounting for 89.8% of the company's total gross profit. Supporting business gross profit margin is much lower, but it is also an indispensable part of high-speed service, but also as the main business. The total revenue of the two pieces accounts for 89.3%, and the gross profit accounts for 91.3%.

In 2018, the average daily toll income of Shanghai-Nanjing Expressway was 13.711 million yuan, and the annual toll income was 5 billion yuan, while the total toll income of the company was 7.46 billion yuan. Shanghai-Nanjing Expressway accounted for 67.1%, which is still the company's main source of income. The gross profit of Shanghai-Nanjing Expressway is 3.59 billion yuan, accounting for 74.1% of the company, which is the main source of gross profit of the company.

The Nanjing-Shanghai Expressway completed the expansion of the Shanghai-Nanjing Expressway at the end of 2005, rising from 4 channels to 8 channels, with large capital expenditure during the period. In the following 10 years, the number of projects under construction on Nanjing-Shanghai Expressway is very small, only some maintenance project expenditure. Until 2015, the construction of Zhendan Expressway began, followed by a series of highway construction projects, and capital expenditure soared. By Q3 in 2019, the company was under construction of 12.84 billion yuan.

Such a huge capital expenditure needs to consume a lot of money, although the company's dividend ratio has declined in recent years, but also maintained at more than 50%, the remaining funds are not much. Then new debt is needed to build the highway, and the company's total debt increased by 14.54 billion yuan during the 2014-2019 Q3 period. The company's asset-liability ratio also increased from 23.7% in 2014 to 39.9% of Q3 in 2019.At present, the company's annual financial expenses are about 500 million yuan, about 200 million yuan higher than in 2014, and the smaller difference is mainly due to interest rate cuts in recent years.The impact of interest costs is not significant, mainly depends on the rate of return on investment.

Although there is only 248km in Nanjing-Shanghai Expressway, it is the main source of revenue and profit for the company.The expansion began in 2004 and was completed by the end of 2015. The cost is very low. The cost per kilometer is only 43 million yuan. The eight lanes of the Wufengshan river-crossing connection project, which began in 2017, cost as much as 284 million yuan per kilometer. In addition, the raw materials and labor costs required for maintenance continue to rise.

Take Zhendan Expressway as an example, it was completed in 2018 at a cost of 1.73 billion yuan, with a maximum depreciation of 35 years and an annual depreciation expense of 49 million yuan. Zhendan Expressway currently has an average daily income of 149000 yuan and an annualized 53 million yuan, plus maintenance, collection and other fees, which is basically at a loss. However, Zhendan Expressway will not be opened to traffic until September 30, 2018, and it will take some time for traffic to rise. It is expected that with the increase in traffic, Zhendan Expressway will gradually make a profit.

The company should grow high-speed, Wufengshan cross-river connection project, etc., the cost is very high, profitability will be relatively general. The current passenger car fare of Jiangsu-Zhejiang-Shanghai Expressway is 0.55 yuan per kilometer, which is similar to that of high-speed rail. There is little room for upward price increase, mainly depending on the increase in passenger flow.

The cost of building new highways will be relatively high, but the company's projects are basically in the Yangtze River Delta Corridor, and most of them are expected to be profitable. Existing projects such as Shanghai-Nanjing Expressway are expected to maintain operation through maintenance for quite a long time, capital expenditure will be relatively low, and high profits will be maintained.

Now look at the breakdown of the cost of the company's toll road.Taking 2015-2018 as an example, depreciation and amortization accounts for about half of the cost of toll roads, while maintenance costs and labor costs account for the other half. In fact, as many depreciation items were built more than a decade ago, depreciation is low, in fact, the depreciation cost should be more than half. The proportion of depreciation and amortization decreased during the period from 2015 to 2018, mainly due to the increase in labor costs of raw materials. With the completion of major projects such as Wufengshan cross-river connection project, the proportion of depreciation will increase.

The revenue of toll road projects increased by 1 billion yuan from 2015 to 2018, but the total cost only increased by 340 million yuan, and the major increase in cost was mainly labor costs and maintenance costs, which changed with the rising prices of labor and raw materials. The gross profit margin of the company's toll road business in 2018 is basically the same as that in 2015. as there is no price increase in road tolls, the increase in revenue is mainly due to the increase in the company's passenger flow, which is the same as the increase in costs, which is a coincidence. In the future, with the completion of Wufengshan cross-river connection project and Yichang highway, the depreciation cost will increase significantly, and the gross profit margin of toll road project will be under pressure.

According to the growth rate of Nanjing-Shanghai highway traffic in the past few years, it is expected to grow by 6%, 5.7% and 5.4% in 2019, 2020 and 2021, then the company's toll road revenue is expected to be 79.1,83.6 and 8.81 billion yuan. The total income of the company is 98.3,104 and 10.81 billion yuan, and the attributable net profit is 44.4,45.6 and 4.72 billion yuan, respectively, and the corresponding PE is 13.1,12.7,12.3 times respectively.The company's stable growth has high certainty and can maintain high dividends, so it is worth investing.