The Company in a Nutshell
- BIP is a mixed bag of various utility businesses; it’s almost a utility ETF!
- BIP can count on projects across the world, with rock-solid contracts that perpetuate their growth.
- BIP is one of the largest owners and operators of critical infrastructure networks.
Date Reviewed | 8/16/2024 |
Company Name | Brookfield Infrastructure Corp |
Symbol | BIPC |
Sector | Utilities |
Industry | Utilities - Regulated Gas |
Beta | 1.4 |
PRO Rating | 4 |
Dividend Safety | 4 |
Business Model
Brookfield Infrastructure Corporation is a global infrastructure company. The Company owns and operates assets in the utilities, transport, midstream and data sectors across North and South America, Asia Pacific, and Europe. It owns interests in a regulated gas and electricity business in the United Kingdom, a regulated natural gas transmission business in Brazil and a global intermodal logistics operation. Its regulated gas transmission operation in Brazil operates approximately 2,000 kilometers of natural gas transportation pipelines in the states of Rio de Janeiro, Sao Paulo, and Minas Gerais. Its regulated distribution operation is the independent last-mile, multi-utility connection provider, with approximately 4.5 million connections. The Company’s global intermodal logistics operation is the world’s largest lessor of intermodal containers with a fleet of over four million containers representing seven million twenty-foot equivalent units (TEUs).
Current price | 42.35 |
ROE | 0.00 % |
ROIC | 9.35 % |
Shareholder Yield | 2.10 % |
5-Yr Total Return | 124.75 % |
1-Yr Total Return | 16.45 % |
Next Earnings Date | 10-30-24 |
Latest Quarter Information
08-01-2024, Brookfield Infrastructure continues to report solid growth quarter after quarter. For Q2, funds from operations (FFO) was up 10% to $608M while FFO per share was up 7%. The utility segment FFO was down 20%. The decline is attributable to capital recycling activity, including the sales of Australian and Brazilian interests. On the other side, the transport segment FFO jumped 60%, bolstered by recent acquisitions. Midstream FFO was down 11%, impacted by the financing of BIP’s U.S. gas pipeline. Finally, data centers were up 8%, driven by more acquisitions.
What the CEO said:
"We delivered strong second-quarter results driven by robust organic growth and the positive impact of several years of outsized capital deployment,” said Sam Pollock, Chief Executive Officer of Brookfield Infrastructure Partners. “The outlook for growth is very favorable as the surge in AI adoption is generating substantial capital deployment opportunities across our data, electric utility and natural gas sectors.”
What we say:08-01-2024, Brookfield Infrastructure continues to report solid growth quarter after quarter. For Q2, funds from operations (FFO) was up 10% to $608M while FFO per share was up 7%. The utility segment FFO was down 20%. The decline is attributable to capital recycling activity, including the sales of Australian and Brazilian interests. On the other side, the transport segment FFO jumped 60%, bolstered by recent acquisitions. Midstream FFO was down 11%, impacted by the financing of BIP's U.S. gas pipeline. Finally, data centers were up 8%, driven by more acquisitions.
Investment Thesis
BIP has built an impressive infrastructure portfolio through various business segments: Utilities (30% of FFO) includes gas pipelines, electricity distribution and transmission lines, and smart meters. Transport (30%) includes railroads, terminals (ports), and toll roads. Midstream (30%) includes transmission pipelines, natural gas storage, and processing plants and polypropylene production capacity. Finally, Data (10%) consists of telecom towers, fiber optic cables and 50+ data centers. In purchasing BIP shares, an investor will purchase a mixed bag of utility types. Brookfield has ample liquidity and no significant debt maturities in the next 5 years; it is also backed by Brookfield Corporation (BN). This is clearly a “go-to” stock if an investor is looking for income. The company offers a stable business model based on predictable cash flows with inflation-indexed contracts. This is how BIP is able to report stable growth, even in challenging times. In 2023, BIP announced the acquisition of Triton International for $13.3B. Triton is the world’s largest owner and lessor of intermodal containers and is a critical provider of transportation logistics infrastructure supporting global supply chains. We can see Triton’s addition pushing revenue up in 2024. An investor now has the option to trade BIP either as a limited partner or a corporate shareholder; please look to your accountant to assist you with regards to how to hold this stock.
Dividend Triangle
5-Yr Rev. Growth | 9.90 % |
5-Yr EPS Growth | -21.90 % |
5-Yr Div Growth | 0.00 % |
Potential Risks
BIP requires billions to finance its projects. The company now has total long-term debt of more than $29B USD, up from $10B in 2018. BIP is a capital-intensive business and requires lots of debt to finance its projects. Total long-term debt has remained stable in 2022, which is good news. The company continues to exhibit interest in new projects, which require more financing. This could eventually pose a problem as interest rates increase quickly. Another source of concern is their diversification. We could argue that diversification is positive, but BIP is managing a variety of different business types and there are few similarities between data centers and railroads. We wonder: could BIP lose itself in this maze of disparate ventures? Finally, BIP’s financial structure makes it very difficult to analyze. There are blind spots as we can’t review each business operated by the company. We must also trust management in their FFO calculation since it isn’t a GAAP metric. A short report highlighted those flaws in the fall of 2023, but the company hasn’t fallen since.
Debt/Equity | 0.00 |
Financial Debt to EBITDA (TTM) | 4.90 |
Current Ratio (Quarterly) | 0.45 |
Credit Score | 7 |
Dividend Growth Perspective
Brookfield has exhibited a strong dividend history over the past decade. Management is confident that it will maintain a 5%-9% distribution increase policy in the years to come. We also appreciate their FFO payout ratio target of 60-70%, leaving lots of room for business growth on top of dividend growth. If we analyze the company’s cash payout ratios, we won’t be able to understand how this is possible. We must look to BIP’s latest quarter press release because they feature funds from operations per unit (FFO per unit) calculations. For the full year of 2023, the FFO per unit was at $2.95. The utility company announced a 6% increase to $0.405/share in 2024. That would bring the payout ratio to 55% using 2023 FFO.
Dividend ($) | 1.62 |
Dividend Yield Fwd | 3.90 % |
Dividend Frequency | Quarterly |
Average 5-Yr Yield | 3.45 % |
Payout Ratio (%) | 181.75 |
Cash Payout Ratio (%) | 0.00 |
DGR 1-Yr | 5.90 |
DGR 3-Yr | 16.40 |
DGR 5-Yr | 0.00 |
DGR Streak | |
Chowder Score | 0.00 |
Next DVD PMT | 09-27-24 |
Valuation
Recent Annual Dividend Payment | $ 1.62 |
Expected Dividend Growth Rate Years 1-10 | 5.00% |
Expected Terminal Dividend Growth Rate | 5.00% |
Discount Rate | 10.00% |
Discount Rate (Horizontal) | |||
Margin of Safety | 9.00% | 10.00% | 11.00% |
20% Premium | $ 51.03 | $ 40.82 | $ 34.02 |
10% Premium | $ 46.78 | $ 37.42 | $ 31.19 |
Intrinsic Value | $ 42.53 | $ 34.02 | $ 28.35 |
10% Discount | $ 38.27 | $ 30.62 | $ 25.52 |
20% Discount | $ 34.02 | $ 27.22 | $ 22.68 |
Market Cap | 5 B |
PE Ratio | 4.55 |
Fwd PE | 0.00 |
Price to Book Ratio | 36.70 |
DDM Valuation | 34.02 |
Average 5-Yr PE | 184.84 |
Value Score | 90 |
- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.