Buy Brookfield Infrastructure and CP Rail Right Now

Investors love winners, and if you do too, don’t pass up on the Brookfield Infrastructure stock and Canadian Pacific Railway stock. The monster deals they won should drive business growth.

| More on:
Dice engraved with the words buy and sell

Image source: Getty Images.

Persistence and a bit of help won the day for Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) and Canadian Pacific Railway (TSX:CP)(NYSE:CP). The two companies were the original suitors of Inter Pipeline and Kansas City Southern until Pembina Pipeline and Canadian National Railway engaged them in a bidding war.

Inter Pipeline and KSC initially stuck with Pembina and CNR but eventually walked away in favour of Brookfield and CP Rail. Having secured monster deals that would drive business growth, the winning bidders are buying opportunities for long-term and income investors.

More infrastructure assets

At first, Inter Pipeline wanted Pembina as a partner because it was a friendly merger. The change of heart came when proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis said Brookfield’s proposal was too good financially to refuse and had better chances of regulatory approval.

Pembina didn’t like the outcome, although it received $350 million as a break fee. Inter Pipeline is a prize catch for Brookfield Infrastructure, one of the largest owners and operators of critical global infrastructure networks. The acquired entity is a world-scale energy infrastructure energy.

Inter Pipeline has seven pipeline systems, one straddle plant, two off-gas processing facilities, an olefinic fractionator, and 19 million barrels of storage capacity in Western Europe. But the crown jewel is the Heartland Petrochemical Complex (HPC). HPC is Canada’s first integrated propane dehydrogenation & polypropylene complex.

Brookfield Infrastructure will have more infrastructure assets that generate predictable, long-term cash flows. In the first half of 2021, it reported 29.1% and 834.5% growth in revenue and net income versus the same period in 2020. The competitive advantages of this $20.98 billion company are high-quality, long-life assets.

Moreover, Brookfield’s assets are diversified (utilities, transport, midstream, and data) and scattered in North and South America, Asia Pacific, and Europe. It’s also the flagship infrastructure company of global alternative asset manager Brookfield Asset Management.

Future of freight

CP Rail is half the size of CNR, but the $54.91 billion railway operator fought bitterly in the takeover battle for KCS. The American rail transportation rejected CP Rail’s bid and leaned more toward CNR. But in a sudden twist, the U.S. Surface Transportation Board (STB) quashed the CNR-KCS deal. In the end, KCS said the decision of the overseer of freight rail service and rates in the U.S. was good for the railway industry.

Similarly, the KCS Board unanimously determined that the CP Rail proposal was far more superior, after all. On September 15, 2021, CP Rail and KCS formally entered into a merger agreement. The Canadian firm will acquire the American company for US$31 billion (stock and cash). CP President and CEO Keith Creel said the historic agreement is a once-in-a-lifetime partnership.

CP Rail, not CNR, will build the first U.S.-Mexico-Canada rail network with a new single-line offering. Once complete, it will deliver a dramatically expanded market reach for CP and KCS customers. “It should also provide new competitive transportation options, and support North American economic growth,” Creel said.

Go for winners

Brookfield Infrastructure and CP Rail deserve to win the monster deals. The current share price of the utility stock is $69.81 per share, while the dividend yield is 3.7%. You can own the railway stock for $82.82 per share and partake of the modest 0.92% dividend. Both are buying opportunities. Remember, too, that investors love winners.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV, Brookfield Infra Partners LP Units, Brookfield Infrastructure Partners, Canadian National Railway, and PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

Growing plant shoots on coins
Dividend Stocks

Better Buy in August: Passive-Income or Growth Stocks?

With a steady mix of passive-income and growth stocks, investors can create a prime portfolio even during market volatility.

Read more »

a person prepares to fight by taping their knuckles
Dividend Stocks

3 Defensive TSX Stocks for Lower-Risk Investors

These three TSX stocks are all high-quality companies with defensive businesses, making them ideal for low-risk investors.

Read more »

ETF chart stocks
Dividend Stocks

2 Canadian ETFs to Buy and Hold Forever in Your TFSA

ETFs like iShares Canadian Quality Dividend ETF (TSX:DIV) have delivered admirable total returns.

Read more »

TFSA and coins
Dividend Stocks

How to Use Your TFSA to Earn $5,000 Per Year in Tax-Free Income

Canadian stocks like Canadian National Railway (TSX:CNR) can pay substantial amounts of dividends.

Read more »

money cash dividends
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Here are some key reasons why this top Canadian dividend stock could continue to outperform the TSX Composite benchmark in…

Read more »

financial freedom sign
Dividend Stocks

3 Stocks to Buy Now That Could Help You Retire a Millionaire

These three stocks are all reliable and have years of growth potential, making them some of the best stocks to…

Read more »

Target. Stand out from the crowd
Dividend Stocks

This 4.1 Percent-Yielding Dividend Stock Remains a Top Choice for Passive Income

Canadian Natural Resources offers shareholders a tasty dividend yield of over 4% and has grown its dividends by 21% over…

Read more »

dividends grow over time
Dividend Stocks

1 Magnificent Dividend Stock That’s Down 10% and Trading at a Once-in-a-Decade Valuation

This dividend stock may be down around 10%, but there is a huge future opportunity for those wanting growth as…

Read more »