Valued at $21.6 billion by market cap, Brookfield Infrastructure Partners (TSX: BIP.UN) is among the largest companies in Canada. The TSX stock went public in early 2008 and has since returned close to 1,450% to shareholders in dividend-adjusted gains. Today, it trades 17% below all-time highs and remains a top choice for long-term investors. Here are three reasons to buy Brookfield Infrastructure Partners stock like there’s no tomorrow.
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A diversified business
Brookfield Infrastructure is a well-diversified company, allowing it to generate cash flows across business segments. Its primary business segments include:
- Utilities: It operates electricity transmission and distribution lines, natural gas pipelines, and contracted sub-metering services.
- Transport: It offers transportation, storage, and handling services for merchandise goods, commodities, and passengers.
- Midstream: It offers natural gas transmission, gathering and processing, and storage services, as well as a petrochemical processing complex.
- Datacentre: It operates telecom towers, fibre optic cables, cell sites, data centres, and distributed antenna systems.
With more than US$100 billion in total assets, Brookfield Infrastructure Partners’ growth story is far from over as it continues to reinvest in growth projects and acquisitions.
A widening base of cash flows
In Q2 2024, Brookfield Infrastructure Partners reported funds from operations (FFO) of US$608 million or US$0.77 per share, compared to US$552 million or US$0.72 per share in the year-ago period. In the June quarter, it deployed US$620 million to increase the rate base for its utility operations while expanding capacity across other business segments.
Due to elevated demand, the company increased the fleet utilization at its global intermodal logistics operation to more than 99%.
Moreover, Brookfield Infrastructure entered into six new firm processing agreements with existing customers at its Western Canadian natural gas gathering and processing operation. This investment should contribute around US$100 million to the top line each year.
In the last 12 months, Brookfield commissioned 130 megawatts of contracted hyperscale capacity. Additionally, it has a development pipeline of 670 megawatts, which will be completed over the next three years.
Brookfield ended Q2 with almost US$2 billion in total liquidity. Through asset monetization, it generated US$210 million of capital recycling proceeds, bringing total recycling proceeds to US$1.4 billion in 2024.
Brookfield Infrastructure owns and operates a diversified portfolio of cash-generating infrastructure assets, which should help it steadily expand earnings and cash flow in 2024 and beyond.
A growing dividend payout
Brookfield Infrastructure aims to target annual returns between 12% and 15% to shareholders over the long term. It expects to generate returns from in-place cash flows, investments in upgrades, and the expansion of its asset base.
The company’s growth in FFO will translate into consistent dividend hikes. Today, Brookfield Infrastructure pays shareholders an annual dividend of US$1.62 per share, indicating a forward yield of 4.7%. Moreover, these payouts have risen at an annual rate of 8.9% in the last 14 years, significantly enhancing the yield at cost.
With a payout ratio of less than 70%, Brookfield Infrastructure should maintain its dividends across business cycles. Its conservative payout ratio is underpinned by stable, regulated, or contracted cash flows generated from core operations. Additionally, the company should benefit from rate cuts, which will reduce its interest payments in the next two years.
