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Macquarie: Income from Infrastructure

04/03/2015 8:00 am EST


Tim Plaehn

Investment Research Analyst, Investors Alley

This featured recommendation owns a diversified portfolio of long-lived infrastructure assets, explains income expert Tim Plaehn, editor of The Dividend Hunter.

Macquarie Infrastructure Company, LLC (MIC) just announced its 2014 fourth quarter dividend of $1.02 per share. That is a 4.1% increase over the third quarter dividend and pushes the forward yield up to 5.3%.

I still view MIC as a solid dividend growth investment. A 5% yield with 10% annual distribution growth from an investment grade company is a hard combination to beat.

The company operates airport services, providing fuel-related services, as well as terminal and hangar operations, to businesses and individuals in the private jet market.

It also owns International-Matex Tank Terminals, one of the largest independent bulk liquid terminals businesses in the US.

In addition, the firm's HAWAI’IGAS unit operates the only utility gas distribution business and the largest liquefied petroleum gas distribution business on the Hawaiian Islands.

Finally, its renewable power and energy division consists of investments in solar and wind power generation facilities primarily in the US Southwest.

It also helps that the Macquarie management has been aggressively pursuing both acquisition and organic growth projects which have been accelerating the rate of distributable cash flow growth per share.

The final icing on the cake is that Macquarie Infrastructure Company reports distributions on an IRS Form 1099.

This means there will not be the Schedule K-1 tax reporting work you get with MLP investments and MIC shares can be owned in qualified retirement plans without any other tax issues.

For those who do not yet own MIC, I would recommend starting with a small position, possibly half of what you view as a full portfolio position.

Then be ready to add to your position if the price either drops back into the low $70s or another acquisition is announced that will propel distribution growth.

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