A global stock to buy for growth and income

Brookfield Infrastructure Partners is a leading global infrastructure company that owns and operates long-life assets in the utilities, transport, energy and communications sectors across North and South America, Asia Pacific and Europe. It has a strong balance sheet and is well positioned to capitalize on investment opportunities in its market. The units yield 4.9 per cent and are a buy for growth and income.

Brookfield Infrastructure Partners LP (TSX—BIP.UN) has split its units three-for-two.

Brookfield says it undertook the split to ensure its units remain accessible to individual unit-holders and to improve the liquidity of the units. But splits, especially frequent ones, can also be seen as a sign of a company’s robust growth.

Brookfield Infrastructure owns and operates infrastructure assets in the utilities, transport, energy and communications infrastructure sectors, located in North and South America, Europe and Australia.

As the unit split would tend to indicate, the partnership is currently undergoing robust growth. For the six months ended June 30, 2016, Brookfield Infrastructure’s funds from operations (FFO) rose 17.8 per cent to US$464 million, from $394 million a year earlier. FFO per share rose 12.2 per cent to $2.02 from $1.80, on more units outstanding.

FFO benefited from solid organic growth across the business, plus increased ownership in Brookfield’s North American natural gas transmission and Brazilian toll road businesses.

Rapid FFO growth has translated into similar growth for Brookfield Infrastructure’s distribution. Earlier this year, management approved a 7.5-per-cent increase in the distribution. But in light of the strong first-half performance, and the growth opportunities that management is currently pursuing, it approved a further 3.5-per-increase with the release of the second-quarter results. The partnership now pays a quarterly distribution of US$0.59, up 11.3 per cent from the $0.53 it paid earlier this year.

With its FFO up 12 per cent year to date, 2016 is proving to be a strong year for Brookfield. What’s more, the company believes its backlog of organic growth projects due to come on-line, combined with its recently acquired assets and substantial pipeline of new investments, will let it continue this strong growth into 2017 and 2018. And if all goes well, management will review the distribution in early 2017, with another possible increase of 11 to 13 per cent.

Brookfield Infrastructure should earn C$5.29 a share in 2016. The units trade at a reasonable 11.9 times that estimate. The annual distribution of C$3.09 a unit yields 4.9 per cent.

Buy for growth and income.

 

Money Reporter, MPL Communications Inc.
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