Income investors covet two things: a substantial dividend that disburses regular cash and a dividend that burgeons over time. Enter Brookfield Infrastructure (NYSE: BIP), a prime example of a company that fulfills these dreams.
A Testament to Timelessness
In an era where companies rise, fall, and evolve many times over, Brookfield Infrastructure is a testament to permanence, specializing in assets that transcend time. The company’s forte lies in constructing essential infrastructure that remains in perpetuity. It boasts ownership of 23,000 miles of rail, 2,000 miles of toll roads, 10 shipping terminals, and two export terminals, among other vital assets, ensuring it remains a stalwart in the industry.
Unlike transient trends, the demand for infrastructure is a constant, impervious to the caprices of technology or shifting consumer preferences. While the landscape of commerce morphs continuously, the need for airports, highways, railroads, and seaports only amplifies with time. This underscores Brookfield Infrastructure’s position as a purveyor of indispensability.
Moreover, the company’s ownership of infrastructure assets poses an intimidating barrier to potential competitors. The staggering capital and time investment needed to replicate and acquire permits for similar assets furnish Brookfield Infrastructure with a remarkably sturdy competitive edge.
Capitalizing on Unwavering Momentum
Over the past decade, Brookfield Infrastructure has consistently bolstered its dividends, with the sole exception being a minor dip during the onset of the pandemic. The steadfast growth trajectory of its payout, which has nearly tripled over 14 years, bears testament to the resilience of its capital recycling program. By divesting mature assets at their zenith and channeling the proceeds into burgeoning projects, the company propels the growth of its dividend.
The company specializes in nurturing infrastructure projects from their inception to fruition, capitalizing on the primary phase’s greatest potential returns. Once the assets are poised for success, the company judiciously divests them at a premium. This cycle of continuous reinvestment fuels the perpetual growth of its dividend.
However, the company’s strategy does entail risk, particularly at the apex of maximum returns, when infrastructure projects are multifaceted, lengthy, and capital-intensive endeavors. The reliance on debt to bridge the gap between construction and future cash flows adds another layer of complexity, resulting in occasional share price volatility. Despite these short-term undulations in share price, shrewd investors have availed themselves of these fluctuations to secure an attractive dividend that has burgeoned significantly over the years.
The recent pullback in the company’s stock price, triggered by concerns over interest rates, has resulted in the dividend yield surpassing its 10-year average, offering prospective investors an enticing opportunity.
With its robust track record and a business model set to yield substantial returns in the decades ahead, income investors would be remiss not to consider Brookfield Infrastructure stock following the recent decline.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
