Sometimes, investors only look at the short-term potential of dividend stock because they want a quick return on their investment. However, wise investors look at the long-term potential of their investment. They will consider various factors about the company and its financial history to make a prediction about its long-term potential and whether it can provide solid dividend payouts in the future. If you are looking for a long-term solid dividend stock that you can really on both now an in the future, then Brookfield Infrastructure Partners (NYSE: BIP). Here are some of the reasons why this is a solid dividend stock and why you should consider investing.
Brookfield Infrastructure Partners was the infrastructure arm of alternative asset manager Brookfield Asset Management. In 2008, Brookfield Infrastructure Partners was spun off as a stand-alone publicly traded partnership. This global company is headquartered in Toronto, Canada. Brookfield Infrastructure Partners owns and operates infrastructure companies in a variety of industries, including utilities, energy, transportation, and communications. The CEO is Sam Pollock, who has held this position since 2006, and he worked previously at Brookfield Asset Management since 1994. The Motley Fool gives a general overview of the dividends to help investors decide if this is a good investment for them or not. They say that between 2009 and 2017, the dividend per share climbed at a compounded average clip of 12 percent. During that same period, the company’s per unit of funds from operations has grown at a compounded rate of 21 percent, and this means the dividends are well covered.
They also say that the dividend yield has remained consistently above three percent over the years and that it has risen to 4.1 percent. This shows that Brookfield Infrastructure Partners has remained a solid dividend stock in recent years, and this is a potential indicator that it will continue to perform well. According to Seeking Alpha, The first point they note regarding the solidity of these dividend stocks is that the company has the ultimate wide moat business model. This means that they need recurring cash flow from wide moat assets that rivals cannot disrupt. A good example of these types of assets is utilities as they are often government-sanctioned monopolies. The downside for many utility companies is that they are restricted by geography. However, that is not the case for Brookfield Infrastructure Partners as it is the most diversified utility in the world. In total, they have 35 assets across five continents that are worth around $29 billion. The diversity of the company combined with the cash flow and the low maintenance costs is why this company has generated such impressive distribution growth.
Seeking Alpha also note that the world-class management team also contributes to the long-term investing success of BIP. Brookfield Asset Management has more than 115 years of experience and offices in over 30 countries. The management of both BAM and BIP is strong and reliable. They are particularly good at making profitable acquisitions that contribute to payout growth. Looking at the payout profile of a company and the projected payouts for the next decade are important considerations when decided whether to make a long-term investment. The payout profile has three parts to consider; yield, safety, and long-term growth. The yield is three times that of the S&P 500, and 1.2 percent above the average yield for utility companies.
In terms of safety, BIP has a strong balance sheet. It has an above average leverage ratio for utility companies, it is below the average of MLPs, and a strong investment grade credit rating. It can borrow at low rates with low capital costs and high gross cash yields on investment. Their debt is predominantly long-term fixed rate, so there will be no surprises over the next few years. It is the growth rate that is probably the main reason to own this stock. Analysts believe that the numerous long-term growth catalysts will lead to this company achieving nine percent long-term distribution growth within the next decade. Although there are some other utility companies that are growing at an even faster rate, none have the global presence of Brookfield Infrastructure Partners. Another factor you may wish to consider is the price of the dividend stocks. Recent deals have caused a spike in the price, but they are still a good stock to buy. Experts have analyzed whether it is still a safe bet, even with the price hike. They have used various valuation techniques to assess the dividend stocks long-term potential, including a comparison of the five-year average and the long-term median value. They found that both results were around 4.5 percent, which shows that it is solid for long-term investment.
Income Investors argues that investors should not worry about all the increases. They say that the company’s business is growing at a faster rate than the cash payout to investors. In the first quarter of 2019, BIP generated funds from operations of $351 million. This is the equivalent to $0.88 per share, which is a four percent increase year-on-year. They also note that BIP management is committed to increasing the yields for investors. Their aim is to achieve a 60 percent to 70 percent payout ratio. In the first quarter of 2019, they exceeded their target when they achieved a payout ratio of 71 percent. Even taking into account exchange rate fluctuations, the payout ratio came to 69 percent, which was at the higher end of their target range.
Overall, Brookfield Infrastructure Partners remains a strong option for investors who want to invest in dividend stocks in the long-term. This company is one of the most attractive prospects on the market today, and predictions suggest that this will remain a solid dividend stock. Therefore, this is definitely one to consider adding to your long-term investment portfolio.