Shares of Brookfield Infrastructure Partners (TSX:BIP.UN) have taken investors on a wild ride over the last year. Bottoming out back in October, the company has since come back up in share price. That being said, BIP stock is still down 10% in the last year alone.
With all this volatility and a share price still down, investors are likely wondering if the stock is still a good investment for long-term gains. Or at least over the next five years. To consider that, we’ll look at what the company, and infrastructure in general, has in store over that time.
Infrastructure: Growth or no?
Before we even consider whether BIP stock is a good investment, let’s consider infrastructure as whole. There are reasons to be optimistic and pessimistic during that time, as we move from an economic downturn back to a recovered economy.
The United States in particular is likely to see a huge amount of development in infrastructure — particularly for roads, bridges, broadband, and water systems. Analysts predict this will lead to a rise in infrastructure spending in the next five years by whoever is voted in as president come November.
However, data centres will likely be close behind. There remains significant need for these data centres, and even more so with the investment for artificial intelligence (AI). Yet that won’t come easily, with challenges including inflation, labour shortages, as well as general red tape.
Globally, however, infrastructure will remain a key focus in the next five years. In fact, spending is predicted to reach around US$9 trillion by 2025 alone — especially in developing economies such as China. So, while the pace will grow, it’s likely to be slower than originally hoped for by investors.
Where BIP stock fits in
As for BIP stock, the company has grown significantly in the last decade. It first focused on timber properties and electricity transmission lines. Since then, it’s expanded and diversified through acquisitions.
Now, the company has a global operation that spans Australia, India, and Colombia. Even during economic challenges during the COVID-19 pandemic, the company managed to continue growth through strategic acquisitions. However, things have changed as of late.
Shifting focus, but earnings need to catch up
Moving away from timber, the company is looking ahead. BIP stock is now investing in critical infrastructure such as cell towers but also data centres. And this should bring in continued revenue growth. However, the company’s earnings haven’t growth as fast as its revenue. With debt and interest rising, this could continue to hamper earnings growth.
Yet the company did make a major move lately that could bring investors back on board. This was after raising US$28 billion for its largest-ever fund, “wagering on infrastructure assets the company believes would benefit from a shift to ‘deglobalization’ given recent geopolitical tensions.”
Bottom line
While this recent news brought shares up slightly, there is still more growth needed to really see BIP stock as a growth stock for the future. For now, the immediate future of the next five years looks uncertain at best.
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It’s likely that it will be slow moving for investments into infrastructure with interest rates still high. In fact, it might take that whole five years to see earnings catch up with revenue.
That being said, if you hope to hold longer than then, you could be in for slow but steady growth as the company recovers. And in that time, you’ll receive a 5.52% dividend yield. So, as always, make sure to look at your own portfolio and risk tolerance before considering BIP stock.
