REITs are viewed as bond surrogates. The value of bonds and similar income investments frequently de...
Macquarie: High Yield in Infrastructure
07/11/2017 2:52 am EST
The stock has generated a 50% total return since I put it in the portfolio in June 2014. The payout per share has increased every single quarter and is now almost 40% higher than when we added it to the portfolio.
MIC owns a diversified portfolio of infrastructure assets. These holdings include an airport services business that provide fuel, terminal and hangar operations to the private jet customers at local airports.
One of the largest independent bulk liquid marine terminals businesses in the U.S.. Hawaii Gas is the only utility gas distributor and the largest propane distributor in that state serving 68,000 customers. MIC Hawaii also includes a controlling interest in the Waihonu solar facilities on Oahu.
Critchfield Pacific is a design-build mechanical contractor focused on designing and constructing energy efficient HVAC systems and related infrastructure.
Contracted power includes gas-fired power generation facility supplying electricity to New York City and solar and wind power generation facilities primarily in the U.S. Southwest.
Macquarie has grown its revenue, cash flow and dividends through a steady plan of acquisition to expand ownership in the different business sectors. The result has been steady double-digit annual dividend growth, with the payout per share increased every quarter since the 2013 third quarter.
The company just announced an increase in its growth capital investment budget for 2017. This is a good indicator that the dividend increases will continue to reward investors.
Even though the dividend has been growing, the MIC share price has been flat for the last year and remains 10% below the peak set in summer 2015. At that time, the yield was less than 5%. Now MIC yields 6.7%.
Currently, MIC gives income investors three benefits:
- A great yield of 6.7%
- Strong dividend growth close to 10% per year
- Potential for capital gains as the share price catches up with the dividend growth.
We like the diverse infrastructure asset focus of MIC. As long as management keeps guiding for continued dividend growth and the dividends continue to be increased, MIC will remain a recommendation in our portfolio.
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