Founded in 2007, Brookfield Infrastructure Partners (BIP - Snapshot Report) is a global owner and operator of high quality infrastructure assets in utilities, transportation, energy and timber businesses. Based in Bermuda, the partnership owns holding corporations in the U.S., Canada and other jurisdiction.
The high quality, long life assets allow the partnership to generate solid and consistent cash flow. Brookfield Infrastructure Partners L.P. is a subsidiary of Brookfield Asset Management Inc. The company has a market capitalization of ~$8 billion and is traded on NYSE and TSX exchanges.
Excellent Track Record of Distributions
The board of directors of Brookfield Infrastructure Partners approved to increase the quarterly cash distribution rate to $0.43 per unit, a 15% increase from $0.375 distributed in the previous quarter.
The company has an excellent track record of distribution growth—compound annual growth of over 10% over past five years and has a very attractive distribution yield of ~4.5% currently.
Further, the distributions are backed by stable cash flows as 85% of the cash flows are generated from regulated business or long-term contacts.
Solid Financial Performance
For 2012, the company had FFO of $462 million, up from $392 million for 2011, while the AFFO increased to $353 million from $300 million.
However FFO per unit at $2.41 was unchanged compared with the prior year as (per company) the investments made from recent equity offering did not fully contribute to 2012 results.
BIP recently completed $600 million investment in upgrades and expansion of Australian railroad, which is expected to generate EBITDA of 150 million in the first quarter of 2013.
The timber segment will also contribute higher earnings going forward as the company plans to increase harvest to monetize inventory and meet the rising demand as the housing market recovers.
BIP also expects improvement in port, natural gas transmission and toll roads businesses as the economy recovers.
Additionally the partnership currently has ~$5 billion of organic growth projects in the pipeline—in electricity transmission, rail, ports and coal terminal businesses.
The Bottom Line
Given the high quality of its diversified cash-generating assets, I believe that BIP will be able to meet its total return objective of 12% to 15% as well as distribution growth of 3% to 7% per annum.
BIP is currently Zacks Rank # 1 (Strong Buy) stock and it also has a longer-term recommendation of “Outperform”. Though the stock does not look cheap at the current valuation--(forward P/E of 12.71), the investors should look to buy the stock on any dips, given its excellent growth potential.