Brookfield Infrastructure Partners (TSX:BIP.UN) is a Canadian infrastructure investment company. It operates a number of different infrastructure projects around the world, generally in the following categories:
- Utilities
- Storage
- Power transmission
- Data centres
Brookfield Infrastructure Partners’s diversified approach to infrastructure gives it a lot of optionality. Whereas many companies that operate utilities or telecom infrastructure stay well within their niche for their entire existence, Brookfield tends to branch out. As a result, BIP is able to get exposure to the hot new generative artificial intelligence (AI) sector, whereas many infrastructure companies cannot or will not.
One thing that Brookfield Infrastructure Partners has going for it right now is its dividend. At 4.75%, it’s a pretty high yielder. However, a high yield in itself isn’t an adequate reason to buy a stock: dividends get cut all the time. We need to look at how the company is doing in fundamental terms before we can decide whether BIP is worth buying for the dividend.
Profitability
As far as profitability goes, it’s a mixed story with Brookfield Infrastructure Partners. The company has a 25.4% gross margin, a 24% operating income margin and a 40% earnings before interest, taxes, depreciation, and amortization (EBITDA) margin. These metrics suggest that the company is quite profitable before you take out tax, depreciation and interest expenses. However, the after-tax metrics are generally not quite so rosy. The company has only a -0.09% net margin, a 0.33% free cash flow margin and a 3.82% return on invested capital. On the profitability front, BIP stock gives mixed signals.
Growth
BIP stock fares much better on growth than it does on profitability. In the trailing 12-month period, it delivered the following growth metrics:
- 25% revenue growth
- 34% EBITDA growth
- 29% operating income growth
- 42.5% operating cash flow growth
These 12-month growth rates are all quite good. The long-term numbers are pretty good, as well. For example, over the last five years, BIP stock has compounded its key earnings metrics at the following rates:
- Revenue: 27.5%
- EBITDA: 24.3%
- Operating income: 23.4%
- Earnings from continuing operations: 17.6%
- Assets: 19.46%
Overall, Brookfield Infrastructure Partners has definitely done some growing over the years.
Operational decisions
Last but not least, we can take a look at BIP stock’s future prospects in terms of the company’s operational decisions. This is probably one of the most promising areas for BIP. Brookfield Infrastructure Partners is heavily investing in growing infrastructure categories like cell towers and data centres. These are growth areas because they are required types of infrastructure for generative AI and other “hot” tech niches. Not a lot of infrastructure companies are on the ball with these things, so Brookfield Infrastructure Partners appears to be ahead of the game.
Verdict: Brookfield Infrastructure Partners is worth owning
Based on its operating results, Brookfield Infrastructure Partners appears to be worth owning today. The company has high-quality assets, usually cranks out decent amounts of free cash flow, and pays a stable and growing dividend. There are some concerns about BIP’s earnings being frittered away to outside interests, but the company keeps paying its dividends year in and year out.
