Brookfield Infrastructure (TSX:BIP.UN) Is Poised to Soar Higher in 2020

Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) has gained 37% since the start of 2019 and will deliver further value in 2020.

| More on:
Happy family father of mother and child daughter launch a kite on nature at sunset

Image source: Getty Images

Global infrastructure giant Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) has rallied 37% since the start of 2019 and is poised for even greater gains in 2020.

The company is on track for higher earnings growth, recently announcing that with its partners it had acquired 100% of an Indian company that owns 130,000 telecommunications towers in a US$3.7 billion deal.

Brookfield Infrastructure has contributed US$375 million to the transaction, which will give the business a presence in what is ranked by the International Monetary Fund (IMF) as the world’s fastest-growing major economy.

The IMF predicts that India’s gross domestic product (GDP) will expand by 6.1% in 2019 and by a whopping 7% in 2020. The country also has one of the world’s fastest-growing smartphone markets, indicating that demand for telecommunications towers and other cellphone infrastructure will grow at a solid clip, giving Brookfield Infrastructure’s earnings a solid lift.

Latest deals to boost earnings

The partnership also announced that it intends to acquire Cincinnati Bell (NYSE:CBB) for US$2.6 billion, which values the telecommunications company at US$10.50 per share, or 36% higher than its closing price before the deal was revealed.

That will give Brookfield Infrastructure a solid presence in the U.S. telecommunications industry and further bolster earnings.

Cincinnati Bell is expecting to generate up to US$1.6 billion in revenue for 2019 and an EBITDA of US$400 million to US$410 million.

For the nine months ending 30 September 2019, Cincinnati Bell reported that revenue shot up by an impressive 17% to US$1.1 billion, indicating that it was on track to achieve its full-year guidance.

The telecommunications company generates 57% of its revenue from the provision of fibre optic cable and related services to consumers, small and big business.

The deal gives Brookfield Infrastructure a leading U.S. presence in the provision of fibre optic cables to homes and businesses, which will experience considerable growth because of steadily rising demand for high speed data, voice and entertainment services.

The partnership is also advancing its purchase of railroad company Genesee & Wyoming, giving Brookfield Infrastructure a portfolio of freight railroads across 42 U.S. states, four Canadian provinces, Australia and the U.K.

On completion, that acquisition will further lift earnings and diversify Brookfield Infrastructure’s global presence.

The nature of Brookfield Infrastructure’s assets, including operating in oligopolistic markets and that 95% of its earnings come from regulated or contracted sources, improves their certainty and protects them from economic downturns. The inflation linked nature of 75% of those contracts also ensures that earnings from existing assets will continue to grow.

The growing global infrastructure gap, which is estimated to represent a shortfall of around US$1 trillion, will serve as a powerful long-term tailwind for Brookfield Infrastructure.

Foolish takeaway

Brookfield Infrastructure has positioned itself as a leading provider of infrastructure critical for global economic activity across North America, South America, Western Europe, Australia and India.

This will ensure that earnings continue to grow at a steady clip while endowing the partnership with a wide economic moat and strong defensive characteristics, making it an ideal stock to own during economic slumps.

While unitholders wait for Brookfield Infrastructure’s stock to appreciate, they will be rewarded by its sustainable distribution yielding a tasty 4%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Matt Smith has no position in any of the stocks mentioned. The Motley Fool recommends BROOKFIELD INFRA PARTNERS LP UNITS and Brookfield Infrastructure Partners. Brookfield Infrastructure Partners is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

edit Women wearing red sweater shopping online and using credit card at home office
Dividend Stocks

Safe Stocks to Buy in Canada for December 2023

A Big Bank and an iconic retailer are the safe Canadian stocks to buy in December 2023.

Read more »

Dividend Stocks

2023 TFSA Contribution Time: 2 Dividend Stocks to Buy with $6,500

Earn tax-free dividend income by investing in these top Canadian stocks via your TFSA.

Read more »

edit Sale sign, value, discount
Dividend Stocks

Seeking Value in a Declining Market: Canadian Stocks at a Discount

Check out these Canadian stocks trading at discounted valuations while also providing strong dividends and/or earnings results.

Read more »

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

Parents: How to Give the Gift of Cold, Hard Cash This Holiday

The best thing you can give your kid this holiday season? Cash! Use this method to make money on top…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

Dividend Growth in the Canadian Market: Key Players and Trends

Are you looking for some Canadian dividend-growth stocks to hold for the long term? Check out these stocks for great…

Read more »

Businessmen teamwork brainstorming meeting.
Dividend Stocks

1 of the Best Dividend Stocks to Play an Economic Hard Landing in 2024

Fortis (TSX:FTS) stock won't rocket overnight, but it can help you fare well in a choppy next couple of years!

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Top Consumer Discretionary Stocks to Buy on the TSX Today

Three TSX stocks with varying market caps are the top buys in the consumer discretionary sector today.

Read more »

financial freedom sign
Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

Quality dividend stocks with a high yield such as Exchange Income offer you the opportunity to generate outsized gains.

Read more »