On June 16, Brookfield Infrastructure Partners L.P. (NYSE:BIP) announced it sold the remaining 343,000 acres of timberland for $790 million, finalizing its divestment of its timber business and netting $370 million in cash. Brookfield also sold its remaining acreage in British Columbia for $170 million.
Brookfield continued its divestures in early July, announcing on July 5 that the partnership had entered into an agreement to sell its 42% interest in an Australasian regulated distribution business for $410 million. These sales have net the company a total of $950 million, which it will reinvest in its core businesses; Brookfield expects that money to generate annualized after-tax returns on equity of 12% to 15%.
Those strategic adjustments will continue to fuel the company’s already impressive growth. The company’s second-quarter results from early May saw funds from operations — a key performance metric for MLPs — jump to $160 million, or 80 cents a share, from $108 million, or 58 cents a share, in the same period last year. That 48% increase was driven by organic expansion initiatives and recent acquisitions.
The company’s strong financial profile continues to support its outsize dividend yield of 4.8%. In the past five years, distributions have grown more than 12% a year to a current annualized rate of $1.72, yielding 4.3%. Management targets annual distribution growth between 3% and 7% and paying out 60% to 70% of funds from operations.
Looking forward, Brookfield is expected to increase its earnings by 6% annually over the next five years, outpacing the industry average of 5%. But in spite of its high dividend yield and growth projections, Brookfield’s forward price-to-earnings ratio of 12 is below its 10-year average of 13 and its peer average of 15.
Risks to Consider: Utilities operating in highly regulated markets are always vulnerable to changes in policy and rates. Brookfield also carries significant exposure to the global coal market, with consumption highly dependent on demand from China as its economy showing signs of weakness.
Action to Take –> Brookfield boasts an impressive portfolio of domestic and international infrastructure assets. That places the company in position to capitalize on the bullish trend in global infrastructure spending.
P.S. — Brookfield is a member of a special group of securities we call “Forever Stocks.” These are world-dominating companies that pay investors a fat dividend, dig a deep moat around their business to fend off competitors and buy back massive amounts of stock, boosting the value for the rest of the shares. They’re solid enough stocks to buy, forget about and hold “Forever.” To learn more about these stocks — including some of their names and ticker symbols — click here.
– Michael Vodicka
The article Cash In On Global Growth And Get A 4.8% Yield With This ‘Forever’ Stock originally appeared on StreetAuthority and is written by Michael Vodicka.
Michael Vodicka does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of BIP in one or more of its “real money” portfolios.
