Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) has long been a favourite for investors seeking stability and steady income in the utility space. In the last 10 years, while averaging a nice cash distribution yield of approximately 4.6%, it delivered total returns at a compound annual growth rate of about 14%, eclipsing the Canadian stock market return of about 9% in the period.
The company owns and operates a diversified portfolio of high-quality infrastructure assets across key sectors of infrastructure: utilities, transportation, energy, and data. However, as with any stock, investors should look ahead to determine whether it will continue to be a strong performer in the future. So, where will Brookfield Infrastructure Partners stock be in five years?
A strong foundation for growth
Brookfield Infrastructure Partners is backed by Brookfield Corp., a global investment firm with expertise in managing long-term assets. Brookfield has a 26% interest in Brookfield Infrastructure. This relationship provides BIP with a stable financial foundation and a proven track record of growth.
The company’s revenue is predominantly based on long-term, inflation-linked contracts, providing a stable cash flow stream that supports its generous dividend payout. As a result, the BIP stock performance is generally reliable, especially for income-focused investors who seek its growing cash distribution payments.
BIP has the size and scale to capitalize on the growing global demand for infrastructure. In the first nine months of 2024, it generated US$1.8 billion in funds from operations that were 9% higher year over year.
Brookfield Infrastructure’s growth drivers
Several factors suggest that Brookfield Infrastructure Partners will see continued growth over the next five years. One of the most significant drivers is the ongoing global need for infrastructure development and modernization.
Governments around the world are allocating funds to improve and expand their infrastructure to support economic growth and address issues such as aging systems, climate change, and population growth. This trend is expected to provide ample investment opportunities for BIP across the infrastructure sectors it invests in.
Furthermore, Brookfield Infrastructure Partners has a reputation for its ability to identify and acquire undervalued assets. Through its strong acquisition strategy, BIP has successfully added valuable assets to its expanding portfolio.
Simultaneously, it also has an ongoing capital-recycling program that identifies optimized, mature assets to be sold and proceeds redeployed for higher risk-adjusted returns. As the company continues to deploy capital into attractive opportunities, it should be able to generate higher returns, which will ultimately drive stock performance and a growing cash distribution.
The Foolish investor takeaway
Looking ahead five years, Brookfield Infrastructure Partners is well-positioned for growth. The company’s diversified portfolio, strategic acquisitions, and capital recycling strategy should continue to drive its performance in the long term. All in all, BIP’s solid fundamentals and steady cash flow make it a good investment idea for long-term investors, whether they focus on income or total returns.
At $46.93 per unit on the Toronto Stock Exchange at writing, the blue-chip stock is a reasonable buy, offering a yield of almost 5% and trades at a discount of about 17% according to the analyst consensus 12-month price target.
