Brookfield Infrastructure Partners (BIP), a master limited partnership, owns and operates infrastructure assets all over the world, explains Tom Hutchinson, growth and income expert and editor of Cabot Dividend Investor.
The MLP focuses on high quality, long-life properties that generate stable cash flows, have low maintenance expenses and are virtual monopolies with high barriers to entry.
Brookfield operates a current portfolio of over 1000 properties in 30 countries on five continents. It is well diversified geographically with roughly 25% in North America, 30% South America, 25% Europe and 20% Asia Pacific.
The partnership operates four segments, Utilities, Transport, Energy Services and Data Infrastructure. The MLP's assets include:
• Toll roads in South America
• Telecom towers in France
• Railroads in Australia and North America
• Utilities in Brazil
• Natural gas pipelines in North America
• Ports in Europe, Australia and North America
• Data centers on five continents
The great thing about these properties is that they are essential services that continue to generate revenue in any economy. BIP has the reliable cash flow of a utility but with the growth of an asset class that is increasingly in vogue.
The world is in desperate need of updated infrastructure. Developed economies have badly aging systems in need of replacement and have infrastructure that is woefully insufficient to accommodate growing urban populations and more advanced economies. The G-20’s global infrastructure hub estimates that a global investment of $94 trillion will need to be invested in the next several decades.
The private sector is essential as governments don’t have all those trillions lying around. Limited partnerships, giant sovereign-wealth funds, multilateral and development-finance institutions are raising billion of dollars a year for infrastructure investments. It’s almost becoming a new asset class.
But Brookfield was early to the party. The partnership has been successfully operating infrastructure properties for more than 12 years. And these people know what they’re doing.
Since the IPO in January of 2008, the stock has produced an average annual return of 16.28% (with dividends reinvested), about twice the return of the overall market over the same period.
The solid 4.6% yield is backed by reliable revenues that are holding up very well even during the virus economy. And the payout has grown every year for the last ten years at a better than 10% per year average clip.
This stock has significantly outperformed the utility index and the overall market of the last ten, five, three and one year periods.