Shares of Brookfield Infrastructure Partners (TSX:BIP.UN) fell slightly to end the week after rising slightly on earnings. The real estate investment trust (REIT) reported funds from operations of US$622 million, or US$0.79 per share, for the fourth quarter. But is that enough to consider it a buy?
No, but these reasons are.
Strong value
BIP stock has fallen dramatically over the last while, falling from peak to trough by 42% before climbing back by 45% as of writing. Yet, if you’re a long-term investor wondering if now is the time to get out, analysts suggest holding out a bit longer.
Long-term investors have been quite rewarded up until recently. And now, instead of wondering whether you should sell, some should see it as an opportunity to add more to their portfolio, not less. That’s because it seems shares have fallen thanks to rising yields and interest rates, not anything the business has done to deserve the drop.
To be fair, of course, the company isn’t immune to higher interest rates. In fact, it plans to divest about US$2 billion in assets in 2024 to use in higher-return opportunities. In fact, that’s another advantage the company has above other infrastructure stocks.
Acquisitions ahead?
All this cash on hand should be a major benefit for BIP stock in the near future. That’s particularly through acquisitions. The company could pick up companies that offer very attractive valuations in this high-interest-rate environment.
Now, the company expects to achieve returns from new investments of between 12% and 15%, or even higher than that target. In fact, this was reported during its last earnings report. So, there could be even more expected during the year ahead.
Add to this that the company has the advantage of protection against inflation through inflation laddering. The company has also stated that while 70% of revenues are linked to inflation, about 97% of debt has fixed interest rates. That keeps its expectations steady even during these trying times. BIP stock still looks like a safe and stable stock to consider.
Immediate cash
Alright, so you’re a bit impatient. Perhaps the most obvious reason to consider buying BIP stock these days is because of share buybacks! Investors are pretty much being paid to wait, both through these buybacks as well as from its 4.76% dividend yield.
During its latest earnings report, the company announced the 15th consecutive distribution increase. BIP stock increased its dividend by 6% to US$0.405 per unit for the next quarter. This brings it up to US$1.62 annually. So, that certainly provides investors with an incredible reason to pick up the stock — especially while it trades at just 0.81 times sales as of writing.
And with management believing 2024 will be an even better year, it looks like investors have a lot to look forward to. For now, investors will want to keep an eye on interest rates both here and in the United States. Because once they come down, shares could be on a tear. One that won’t come down for years to come.
