Buy Brookfield Infrastructure for income and growth

Brookfield Infrastructure Partners L.P.  is a publicly traded limited partnership that engages in the acquisition and management of infrastructure investments on a global basis. Its current business consists of the ownership and operation of utilities, transport, energy and communications infrastructure assets in North and South America, Australia, and Europe.

Brookfield Infrastructure (TSX─BIP.UN; NYSE─BIP) had a successful year in 2014, delivering strong results and establishing new platforms that will let it grow and diversify. The partnership redeployed proceeds from its capital recycling program into a number of businesses and committed equity of about US$500 million to the acquisition of an interest in TDF, the largest independent communications tower infrastructure business in France.

Brookfield Infrastructure Partners owns and operates utilities, transport and energy assets in North and South America, Australasia and Europe. It seeks high-quality, long-life assets that generate stable cash flows, require relatively little maintenance and, by virtue of barriers to entry, tend to appreciate in value over time.

As noted above, the partnership delivered strong results last year. For the year ended Dec., 31, 2014, Brookfield’s funds from operations, or FFO, were US$724 million, or US$3.45 a unit, compared with $682 million, or $3.30 a unit, in 2013. The increase reflected organic growth and higher earnings on deployed capital, which more than offset the impact of asset sales. On a comparable or ‘same store’ basis, the partnership delivered growth of 11 per cent driven primarily by growth in its utilities rate base, higher volumes in its transport operations and inflation indexation realized across most of its businesses.

Brookfield has declared a quarterly distribution of US$0.53 a unit for the first quarter of 2015. That’s a 10 per cent increase compared to last year.

Brookfield currently foresees a busy year for infrastructure investments in 2015. It believes the trends it’s seeing in the global economy could provide significant opportunities for growth in its business. There’s the potential for large acquisitions.

The units traded recently at a reasonable 11.4 times the Cdn$4.90 a unit that Brookfield should earn in FFO in 2015. The current annual distribution rate of Cdn$2.65 a unit yields an attractive 4.7 per cent.

Brookfield Infrastructure Partners L.P. is a buy for income and some growth.

(N.B. As a partner in a limited partnership, your liability to the firm or its creditors is limited to the amount you invest in the firm, similar to your obligations as a shareholder in a limited liability corporation. To remain a limited partner, you must take no part in the management of the firm. Also, if you own these units outside of a registered account, you should be especially aware that the distribution you receive will be reported on a T5013 advice slip and not a T5. Your distribution may be made up of Canadian and foreign dividend and interest income, capital gains and return of capital (ROC). You’ll need to keep track of that ROC because it will affect the adjusted cost base of your units. From an accounting viewpoint, it really is much simpler to hold these units in a RRSP or a RRIF where you’ll also avoid potential U.S. withholding taxes.)

 

Money Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846