Brookfield Infrastructure’s stock price climbs on 20% FFO growth
- Funds from operation (FFO) rose 22% for the quarter and 19% for the year.
- FFO per unit rose 13% to $0.97 in the fourth quarter. FFO per unit increased 16% to $3.64 for the year.
- Brookfield saw double-digit FFO growth across all its business segments. Midstream increased $200 million, or 70%, reflecting the integration of the Inter Pipeline assets.
- Brookfield acquired AusNet Services, a critical electricity and gas distributor, in the quarter. It also acquired a 50% interest in Intellihub, a leading provider of smart metres in Australia and New Zealand.
- Brookfield’s board of directors increased its quarterly dividend by 6% to $0.54 per unit.
What happened in 2021 for Brookfield Infrastructure Partners?
2021 was a strong year for Brookfield Infrastructure Partners. The company continued to prove why it is a leading diversified infrastructure business across the world. Across all of its segments (utilities, transport, midstream, and data), BIP enjoyed double-digit FFO growth. The company enjoyed 9% organic growth, which hit the high end of its annual target range.
In early 2021, it made an aggressive bid for Inter Pipeline, which was consistently shut down by Inter Pipeline’s management team. However, BIP’s persistence paid off, and it finally acquired the entire business halfway through the year. That resulted in a 70% FFO increase in its midstream segment.
With energy markets fast recovering out of the pandemic, it is not hard to imagine that this deal will quickly start paying attractive returns. This is especially true once the Heartland Petrochemical facility (the crown jewel of IPL) commences full service. Brookfield Infrastructure Partners stock price has risen nearly 20% since it commenced the process to acquire IPL early last year.
What did Brookfield Infrastructure Partners management say?
Brookfield Infrastructure CEO, Sam Pollock, had an optimistic tone in his fourth-quarter unitholder letter:
“In 2021, we further enhanced the quality of our business by opportunistically deploying capital into several attractive investments and organic growth projects. Furthermore, the monetization of several mature businesses at strong valuations has generated significant liquidity to fund our growth initiatives at a low cost of capital. Consequently, Brookfield Infrastructure is well-positioned to continue its growth trajectory in the years ahead.”Sam Pollock, CEO of Brookfield Infrastructure Partners
What’s next for Brookfield Infrastructure Partners?
The outlook for Brookfield Infrastructure Partners looks very strong. On a net basis, the company actually benefits from economic headwinds like inflation and supply chain challenges. Over 70% of its revenues are adjusted with inflation indexes. So, when the economy is hot, it benefits. Likewise, when the economy is strong, it benefits from higher volumes and rising margins.
Brookfield has a great balance sheet, and it is well on its way to deploying over $1.5 billion into new acquisitions in 2022. The company once again raised its dividend (its 12th year in a row). All around, the company looks well positioned to deliver low-risk, high-single-digit to mid-teens total returns for many years to come.