Brookfield Infrastructure Partners (BIP) is a global infrastructure company with a portfolio of high-quality, long-life assets that generate stable cash flows and support a stream of growing income distributions to investors. BIP is what we consider to be a core income and growth investment, notes Aaron Dunn, senior equity analyst at KeyStone Financial.
The company has a tremendous long-term track record of growing its cash flow and delivering tremendous value to its investors. BIP has a 14-year history of consistently increasing its income distributions on an annual basis. Over the past 10 years, the distribution has grown at an average compound rate of 8%, nearly doubling from US$0.69 in 2013 to US$1.53 in 2023.
It's not easy to find a fundamentally strong investment that offers stable cash flows, growth, and income. BIP defines itself as a “grow-utility” which combines the stability of a utility with the upside of a growing company. The company’s portfolio includes essential assets such as ports, railroads, energy infrastructure, and data centers.
Approximately 90% of the company’s revenue is based on long-term contracts or regulatory rates of return and 70% is indexed to inflation, both of which help to insulate the company from adverse economic events. Despite the stable nature of the business, the company’s internal investments and acquisitions have resulted in cash flow (FFO – funds from operations) per unit more than doubling over the past decade from US$1.31 in 2013 to approximately US$2.95 in 2023.
Looking forward, BIP is well positioned for future growth. The company completed significant asset sales and acquisitions during 2023. The outlook for 2024 is strong and management believes that the current environment provides exceptional opportunities to make investments at returns well above the target rates.
BIP has also been very active in expanding its data center business and has identified this market as providing solid growth opportunities as well as an avenue to participate in key trends such as AI and cloud computing. The company is targeting 12%+ growth in FFO per unit annually over the next one to three years.
BIP’s stock price has experienced significant volatility over the past year, which has moved the valuation and income yield to attractive levels. We believe the company is well positioned to generate significant shareholder value over the next three-plus years.
