While no one can predict the future, Brookfield Infrastructure Partners (TSX:BIP.UN) is obviously a solid investment for those with a long-term horizon. With a diversified portfolio of global infrastructure assets, Brookfield Infrastructure generates resilient, inflation-linked cash flows that ensure consistent growth. Despite recent stock price declines, this well-established company is poised for significant growth over the next five years, assuming no major market disruptions. Here’s why.
Steady growth through diverse infrastructure assets
Brookfield Infrastructure Partners is known for owning and operating high-quality infrastructure assets across the utilities, transportation, energy, and data sectors. In 2024, the company reported a strong 7.9% growth in funds from operations (FFO), with per-unit FFO increasing by 5.8%. This growth is a result of its essential, stable assets and ongoing expansion initiatives. Because of its proven strategy, Brookfield Infrastructure has continued to increase its cash distributions — an increase of 6.2% in January this year, matching its FFO growth rate.
The company’s assets are largely protected by contractual and regulatory frameworks, providing the backbone for predictable cash flow generation. Approximately 85% of its revenues are underpinned by these structures, and a similar percentage is inflation-linked, making Brookfield Infrastructure an attractive choice in times of economic uncertainty. Since the company started trading independently, it has never missed an annual payout increase, building a 17-year streak of consistent distribution growth.
A strategy built on capital recycling and expansion
Brookfield Infrastructure’s growth strategy involves a continuous capital-recycling program. This program identifies mature assets that can be sold to reinvest the proceeds in higher risk-adjusted return projects. In the past year alone, the company secured US$2 billion in proceeds from asset sales and reinvested over US$1.1 billion into organic growth projects and strategic tuck-in acquisitions. These initiatives are adding incremental cash flows, and the company has refilled its capital backlog with roughly US$1.8 billion in new projects for growth.
The careful execution of this capital allocation strategy has fueled Brookfield Infrastructure’s impressive decade-long performance. Over the last ten years, its stock has delivered an annualized return of 11.8%, significantly outpacing the Canadian utility fund’s 6.9% return and the broader Canadian stock market’s 8.9% return during the same period.
A strong dividend yield and attractive discount
The recent market volatility has dragged the stock 18% lower from its 52-week high, pushing its cash distribution yield to nearly 6%. At the time of writing, the stock is priced at $41.16 per unit, making it an attractive idea for income and long-term returns. Analysts believe the shares are currently trading at a 25% discount, presenting an excellent buying opportunity.
Looking ahead, if the stock reaches its consensus price target of $54 per unit in the next five years, investors could see annualized returns of well over 11%, combined with the consistent income generated by its quarterly cash distribution.
The Foolish investor takeaway: A long-term investment with promise
Brookfield Infrastructure Partners is a proven leader in global infrastructure investment. With a strategy focused on strong, cash-generating assets and a disciplined approach to capital allocation, the company is well-positioned for continued success. While the stock may experience short-term volatility, its long-term potential is undeniable. For investors willing to ride out the fluctuations, Brookfield Infrastructure represents a solid choice for the next five years — and beyond.
