Brookfield Infrastructure: Building a Buffett-Style Moat

05/11/2017 2:50 am EST


Tony Daltorio

Editor, Investors Alley Premium Digest

For income investors, one of my favorite plays is the builder, buyer, and operator of infrastructure assets around the world — Brookfield Infrastructure Partners L.P. (BIP), suggests Tony Daltorio, editor of Investors Alley Premium Digest.

Geographically, Brookfield is spread across five continents. It has assets in the U.S., Canada, western Europe, Australia, India, Brazil, Chile, Peru and Colombia.

Its assets span the full range of infrastructure: ports, railways, toll roads, electric utilities, natural gas transmission and telecommunications towers.

Brookfield management -– experts in infrastructure -– have set the company up for organic growth. For example, the company has amassed a rather large natural gas transmission and storage network in the United States.

With demand steadily growing as more and more U.S. utilities switch from coal to gas, BIP stands to benefit. More organic growth will come from the emerging markets as their economies recover and resume a rapid growth path.

I like Brookfield Infrastructure too because it has what Warren Buffett called an ‘economic moat’. It’s not an easy business to get into – you need many billions of dollars and have to learn how to navigate the regulatory requirements of each and every country you do business in.

Since listing in 2008, BIP has given its investors an annualized return of 20%. That is above management’s stated goal of 12% to 15% annual return.

It also has hiked the dividend every year since 2010. Brookfield raised its dividend by 11% for the March distribution, putting the current yield at a bit under 4.5%.

The stock also offers something for growth investors. It rose by 85% over the past five years, outpacing the S&P 500 index’s gain of 70%. This is the type of stock I look for, no matter the economic conditions and you should too.

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